British lender Zopa has raised £140m from US investor IAG Capital in a last-minute effort to salvage its bid to safe a full banking licence.
Zopa was a pioneer of peer-to-peer lending — the place debtors are linked with retail buyers who fund their loans — when it was based in 2005, but it surely has lately tried to transition towards extra conventional sources of funding.
It acquired a provisional banking licence final yr, however wanted to boost additional capital to guarantee regulators it was secure sufficient to function as a full financial institution.
Jaidev Janardana, Zopa chief govt, stated: “This new funding means we now have concluded the fundraising part of our financial institution mobilisation. Definitive agreements to offer the funding have been finalised and are topic to last approvals together with regulatory change of management.
“We proceed to carry our financial institution licence with restrictions and are working intently with the regulators to achieve our full licence. We’re excited that after authorized, Zopa will be capable of launch its financial institution alongside its peer-to-peer enterprise and supply a broader set of merchandise to our clients.”
The fundraising was introduced hours earlier than Zopa’s provisional licence was as a consequence of expire. The funding is predicted to present IAG, which was already a minority investor in Zopa, majority management of the corporate.
The prospect of a deal was first reported by Sky Information over the weekend.
Zopa’s pivot away from peer-to-peer lending highlights cooling attitudes towards a sector which was as soon as feted as a significant disruptive power for UK banking. Begin-ups like Zopa and Funding Circle promised to lend at higher charges than main banks which had pulled out of many areas of lending after the monetary disaster, whereas buyers have been provided higher returns than these on supply by conventional financial savings accounts.
Nevertheless, the sector has been rocked by a collection of scandals this yr and been focused in a regulatory crackdown after the Monetary Conduct Authority discovered that many buyers didn’t perceive the dangers concerned.
