SAN FRANCISCO -
Zopa describes itself as a "social financing network" that brings the credit union philosophy of people helping people to peer-to-peer lending. In Europe, where Zopa has been operating, users log onto zopa.com as either a borrower or investor. Investors can review why the borrower needs the funds, and then choose whether to make a loan. Zopa had delayed its entrance into the U.S. market due to concerns over regulatory and legal issues; the partnership with credit unions aids in compliance with those laws.
The long-awaited, much vaunted partnership between Zopa and credit unions is officially being unveiled this week with six credit unions signed on to the program: Addison Avenue FCU, Palo Alto, Calif.; Affinity Plus FCU, St. Paul, Minn.; First Technology CU, Beaverton, Ore.; FORUM CU, Indianapolis; Provident CU, Redwood, Calif., and USA (United Service of America) FCU, San Diego.
While the goal is to bring more credit unions into the fold, Zopa and its partners said they are confident that anyone who wants to participate in the P2P program can join one of these six credit unions (see story, below). Even so, Zopa's goal is to bring on a host of credit union partners, focusing primarily on-but not limited to-community charters, according to Wade Lagrone, Zopa chief marketing officer.
"We're taking the tools of financial services and changing them and using them in such a way that a person can use them to help themselves and someone else at the same time," Lagrone explained. "It is this aspect of help, of people helping people, that made credit unions the perfect partner for Zopa."
Zopa offers two products, a basic share certificate and a standard unsecured personal loan, both of which are offered through the six partner CUs. In addition to the attractive rates on offer-the Zopa CD is at 5.1% APY (less if an investor chooses to earn less on the CD to help the borrower pay it off faster), and the Zopa loan at 8.75% APR (less if an investor chooses to help the borrower by taking a lower CD rate). The transactions are handled through insured financial institutions, a significant difference between Zopa's P2P offering and others already available on the Internet.
"This is not first and foremost about rate, it is first and foremost about help," Lagrone said. "Credit unions pioneered this philosophy. Zopa has merely added to this philosophy by using technology to make it more transparent to the consumer. We are simply continuing a tradition that began with credit unions."
When a consumer visits the Zopa site and wants to initiate a transaction, Zopa calculates which credit union he is eligible to join based on a relatively short form the consumer has to fill out. "Membership eligibility has long been a challenge for credit unions when it comes to marketing," Lagrone observed. "If you aren't already a member of one of our partner credit unions, we will get you signed up at no cost. We will calculate which credit union they're eligible to join on the fly, so it will be easy for the users."
The amount of "help" an investor wants to offer-and even the type of person or venture the investor wants to help-is up to the investor.
"If you're in a hurry or not feeling particularly generous that day, you can take suggestions from Zopa, take five seconds to find the best rate, and you're done," Lagrone noted. "But if you come through and you have some time, you can look through the profiles of people seeking loans and take a substantially less rate for that CD, say 4.5% instead of 5.1%. And more than one person can choose to help the same borrower, so it's possible that a borrower can have his loan entirely paid off through help."
And the opportunities aren't just for the consumer.
"This positions credit unions as being with that wave of Web 2.0," said Stewart Fisher, VP-business development and retail sales at Addison Avenue CU. "We want to acquire younger members, and this is a way to reach out to the next generation of members."
First Technology EVP and Chief Administrative Officer Brooke Van Vleet agreed. "We know this is a way they're interacting online," she added. "We were one of the first credit unions to partner with brassMedia, and reaching out to the youth market has always been an important strategy at our credit union. This is a natural extension of some of that work."
"USA Federal Credit Union is excited to be a partner with ZOPA because credit unions were the original peer-to-peer lender, people-helping-people, so it is a perfect fit," said CEO Mary Cunningham.
"Zopa will allow our members to engage with other members in a way they've not really been able to before but have always wanted to do," said Brian Volkmann, director of real estate for Affinity Plus. "It really helps us to build a sense of community among our members and a way for them to be able to help each other or help someone's cause that they are passionate about."
"This is something the banking industry frankly could never pull off," Fisher added. "Banks are set up to be self-interested parties, they are not set up to be collaboratives. This helps define the credit union difference in a new way to a new audience."
Doug Sharkey, VP-lending at FORUM CU, noted, "It is the social aspect of community and help that definitely sets Zopa apart from the other peer-to-peer lending offerings out there. And it's also what sets credit unions apart."
Affinity Plus' Vokmann noted that the profiles borrowers will share through Zopa helps members understand exactly what they are buying into when they buy into a credit union and Zopa. "You see a real picture of their goals and what they are trying to accomplish and how your dollars can help make that happen."
There is also the opportunity to move into what is still largely a new space, something that can be daunting for a credit union to do alone. "You have to open to traversing the unknown," said Jim Ernest, EVP at Provident CU. "The whole thing seems esoteric at the start and there were lots of questions about risk and who is going to manage this, who is going to manage that. It's like moving into any new market...At the end of the day, we're granting loans and selling CDs, and it's what we've been doing for our members as part of our core business every day. This is just a new way of doing that."
