The latest entry in the U.S. online social lending market is a British company that is facilitating loans made to people who receive help repaying the funds from the interest paid on certificates of deposit purchased by others.
Zopa Ltd. launched in the United Kingdom in 2005, letting Internet users fund loans to each other and earn interest income — a model later emulated by U.S. rivals.
In the United States, Zopa is using a different model. After getting loans, borrowers set up profiles on Zopa's U.S. Web site, which went live Tuesday, asking for help repaying the debts (though Zopa stresses that borrowers are responsible for their debts).
Other users buy CDs and are required to donate a portion of the interest they earn to help a borrower of their choice pay back the loan.
"As we go around the world, we're going to adapt our models to the cultural and regulatory structures of the different countries," Doug Dolton, Zopa's global chief executive, said in an interview Monday. "You're seeing a maturation of the process and our learnings from the marketplace."
Other U.S. social lending sites provide ample information about the borrowers to prospective lenders but do not help the lenders overcome their relative inexperience, Mr. Dolton said.
"Making loans is very, very, very difficult," he said. "It's not something that the average person can just come along and take a look at a scenario and determine what their true, risk-adjusted yield return is."
The appeal of online lending is that lenders learn how borrowers will use the money, Mr. Dolton said.
The personal connection is critical to online lending, particularly in the United States, he said. "We are a society that believes a lot in helping others."
Zopa has enlisted six credit unions to fund the loans and sell the CDs.
When they sign up with the service, Zopa's U.S. users become members of one of the credit unions, all of which pay 5.1% interest for a one-year CD. The depositors are all required to donate at least 10 basis points of the interest to help borrowers repay their loans.
Jim Ernest, an executive vice president at Provident Credit Union of Redwood Shores, Calif., said that even though it may not be obvious, the ability to help another person is very appealing.
"Before the launch, the immediate reaction was 'Jeez, how philanthropic are folks going to be?' Well, you'd be surprised," Mr. Ernest said. "People are really intrigued by this."
He also hopes to attract more members through Zopa.
Kyle Markland, the chief executive of Affinity Plus Federal Credit Union of St. Paul, said he hopes Zopa will appeal to college-age members. "We have a lot of younger members," he said, but many loan "procedures and products are not designed" for them.
By contrast, many college students are comfortable with social networking sites, he said, and over time could mature from a borrower "to the saver" and buy a Zopa CD.
The credit unions have not adjusted their membership requirements as a result of working with Zopa, though Zopa claims anyone in the United States can participate.
Edward Woods, a senior analyst for the Boston market research firm Celent LLC, said the approach could appeal to younger consumers. "This is a way to be relevant to that demographic group."
It is not unreasonable to think that people would be willing to donate money when opening a CD, Mr. Woods said; it is comparable to agreeing to make a charitable donation on a tax form or at the checkout counter of a grocery store.
