The UK’s peer-to-peer lending sector is witnessing the beginning of a “new era” following the departure of Zopa, Filip Karadaghi, co-founder of LandlordInvest has said.
In a post published on LinkedIn, Karadaghi (pictured) noted that while the original ‘Big 3’ platforms – Zopa, Funding Circle and RateSetter – had the first mover advantage, they “missed one fundamental point: profitability.”
“None of the Big 3 ever made a profit and their total combined accumulated loss since they began trading is a staggering £215m”, Karadaghi said, citing Companies House filings.
“A company that is constantly loss-making will of course, per the dynamics of a market economy, sooner or later go out of business, change its business model with the hope to become profitable at some point, or be acquired at a deep discount.
“A crisis often reveals who has been swimming naked. The Covid-19 pandemic was no exception.”
Zopa was the first P2P platform when it launched in 2005. Last month, the company announced that it would end its P2P lending operations by 31 January 2022, in order to focus on the Zopa Bank brand.
“I would say that the belief that P2P is dead is misconstrued and that we are instead witnessing a new era, where platforms that focus on both operational and financial resilience are capturing market share and hopefully shaping a newer and brighter future for the whole industry and its stakeholders,” he said.
He added that a handful of failed property platforms failed “solely due to [the fact that] their management teams were either incompetent and/or fraudulent”, and urged investors to seek out platforms which can demonstrate operational and financial resilience, with a clear path to profitability.
“We are smaller, but by building solid fundamentals, compared to the predecessors who were solely focused on growth and capturing market share, the industry will again grow into a substantial position and deploy a significant amount of funds and support the economy,” he said.
“And the next time a crisis strikes, the industry participants can hopefully rely on a stronger fundamental position.”