Zopa Gets Very Stable
I’ve said before that Zopa could be a classic stable system.
Over the last three weeks, the rates I’m charging to lend out money on Zopa have hardly changed. I set them just under the top limit of the Zone Of Possible Agreement, that gives Zopa its name. The rate for the B, A and A* markets have been 7.6, 6.7 and 6.3 respectively for the last ten days now, which isn’t a bad rate.
Not bad that is, before tax and for effectively three years!
My rate this year so far is 4.58%. It’s been distorted a bit as I’m loading money into Zopa like crazy.
How Long Does It Take To Lend Out £10,000 On Zopa?
£10,000 was transferred into my Zopa account on the 23rd of August. It did take a couple of days or so to actually arrive after leaving my bank account, but then that is the bank transfer system.
Surely in this day and age, it can be an instant event!
My old mate, David, once said that banks make up to a third of their money on overnight lending. So my £10,000 for two days lent out at only three per cent, whilst in the care of the banks would make them about £1.64. Not much, you may think, but it’s pure profit and how much money is there in the system? I bet they lend it at a higher rate than three per cent too.
After the £10,000 arrived in my Zopa account on the 22nd, on the 23rd, I had £11,960.43 either offered for lending or being processed.
A week later and that figure is down to £9060.43. So effectively £2,900 has now been lent out. £9,300 in total is being processed, but some of that comes from money that has been reinvested.
So it would appear that Zopa has a processing limit.
Is This A Zopa Advantage?
Zopa doesn’t process contracts at the weekend. Or it doesn’t appear to! This might be because they have to interface with the credit agencies and the banks and those don’t work 24/7.
So with the bank holiday tomorrow, it will be interesting to see how the money I have on offer disappears. Last week I loaded my account with £10,000, so there is plenty of money there.
On Saturday morning, I had £650 being processed in 13 contracts. These will probably start being sorted on Tuesday.
This morning it was £3350 in 67 contracts.
As I write now at 22:43 on Sunday, it’s £4,700 in 94 contracts. The last of those contracts was setup about 22:15. I’m watching to see if this is the last contract of the night.
Do Zopa have a cut-off time for loans or if say you applied at 04:00, would you be taken seriously? I wonder what Warclays would say if you applied for a loan at that hour?
If Zopa does accept loan applications at any hour, that must surely be a business advantage, as well as one for the customer, as we all have those times, when we prefer to fill in forms.
I’ll finish now for a bit. but I’ll update this in the morning.
I didn’t get any more contracts last night and when I went to bed at around midnight, there were still 94 contracts.
I got up just before seven on Monday and another had dropped off, so the number was now down to 93.
As I type this at 08:00, the number of contracts being processed is now 96. So people are still applying for loans. How many other places could you apply for a loan at this time on a bank holiday morning?
The clue is in the words bank holiday!
It’s now 12:00 and the number of contracts being processed has risen to 113.
And now it’s 18:22 with the contracts standing at 140.
21:22 and it’s 151.
It’s now Tuesday morning at 11:00. None of the flood of offers from the weekend have been fully processed yet, but that queue is now at 157.
I’ve also heard from Zopa and they say that they’re a 24/7 operation as regards to applying, but that obviously processing is usually done on a nine to five basis, Monday to Friday. But they are starting to do this on some weekends.
It’s now 13:00 and the processing has climbed to 166. Of the ten grand I put in, I have just about two grand left to lend out.
It’s now 15:42 and we’re at 170. Nothing seems to have accepted and signed off yet!
It’s now 18:10 and 20 contracts have been fully accepted and signed off. I’m not sure how many were not accepted, but it can’t have been more than a few!
Disruptive Innovation
I’ve not heard the term before, but read this article. It starts with this question and answer.
Question: what do these companies have in common?
Skype, Spotify, Marks and Spencer, Whipcar, Zopa, Zilok, Kiva, Patagonia, Kickstarter, Café Direct, Taskrabbit, Buzzcar and InterfaceFLOR.
Two of my favourite innovators; Zopa and Kiva are mentioned in the same breath as quite a few companies like, Skype, Spotify and M&S.
If the article has a fault, it’s that it misses out a couple of well known names, who the writer would call disruptive innovators.
I would have thought ARM Holdings and Dyson should be on the list. And I would think that a certain company called Metier Management Systems was one of the first! So we were only a shark in a small pond, but we completely rebuilt the pond.
Thoughts On Zopa’s Rapid Return
Zopa has a system called Rapid Return, which allows you to sell on loans.
I haven’t picked up a loan through someone else wanting to pass it on for over a year now.
Judging by the rules for Rapid Return, which mean that any loan that has missed a payment can’t be passed on and looking at the statistics for my loans, I would suspect it’s not a lack of eligible loans, but more that people are holding on to their loans. And especially the good ones! They’ve no choice with bad loans.
So does this mean that Zopa is attracting a credit-worthy class of borrower? If so, that’s good news.
Did Betfair Lay Down The Model For Social Lenders?
Zopa, Funding Circle and Ratesetter, think they are unique, but did they just borrow the principle from the betting exchange, Betfair.
In all four, you can play both sides against each other, although the purpose of Betfair is different.
The same principles could also be applied to an energy exchange. Let’s say a town or an area got together and pooled their energy needs and say they wanted a particular price, which the energy suppliers could then bid for.
I don’t see too much difference.
Peer-to-Peer Lending Has A Record July
This article from This Is Money has the story and it seems the banks competence and behaviour is to blame. I can’t see the banks improving their ratings for a month or so, so that must be good for the social lenders.
Is There A Case For A mini-Peer-to-Peer Lender?
By all accounts, the lender of last resort, Wonga, is successful, despite the fact that it lends money at extortionate rates to those who shouldn’t really be borrowing money. On the other hand, the major peer-to-peer lenders, like Zopa, Funding Circle and Ratesetter, go from strength-to-strength and continue to gain plaudits from financial commentators.
If the peer-to-peer lenders have a problem, it is the perceived entry level, where potential investors like the concept, but are put off by not wanting to put several thousand pounds at risk.
So could the parameters of the peer-to-peer model be modified to borrow smaller amounts and lend it to out in dribs and drabs as payday loans?
I’m not sure, but it would be a much more ethical way of satisfying the market and possibly educating the borrowers as well.
You’re probably venturing very close to a completely automated credit union.
Not All Zopa Bad Debts Stay Bad
My bad debts in Zopa have been eighteen accounts owing a total of £458.35 since the eighth of June. They did reduce by the princely sum of five pence a couple of weeks ago, but yesterday, I got a surprise payment of £32,24 to reduce the number of bad debts to seventeen.
Good Riddance!
I’ve just had a message through the ether from my late friend, David. He says, that he is pleased that Bob Diamond has resigned. Most of the other things he said were a touch garbled and until I get the proper message, I’ll not put any more of his thoughts.
I do know, that bankers of David’s era, will be happy with the splitting of retail and investment banking. After all the first is just computer processing on the back of decisions made by talking to your customers and the second is just gambling.
Incidentally, thinking about Zopa, it may not be a bank, but it is computer processing on the back of decisions made by talking to customers, with a bit of help from computerised credit scoring.
The Anonymous Widower 