Zopa Ltd., the online peer-to-peer lender that has been operating for two years in the United Kingdom, plans to move into the United States this year.
Expanding into this market would put Zopa into direct competition with its U.S. rival, Prosper Marketplace Inc., which has been helping consumers lend each other money for just over a year. Instead of battling for the same customers, the two companies said that a second player here would generate buzz for the emerging concept and attract more users to both sites. Related Links
"My primary focus will be in getting the U.S. operation launched," Mr. Dolton said in an interview.
Though he said very little about Zopa's specific plans for its U.S. site, he said he looks forward to moving in on Prosper's turf. "I love competition," he said. "We're not the same as Prosper, and you'll see that."
Chris Larsen, Prosper's co-founder and chief executive, who previously founded E-Loan Inc., said he did not see Zopa's U.S. plan as a threat. "We've been expecting this for a year and a half now," he said.
The concept of using the Internet to facilitate peer-to-peer lending is "all so new, it's not really that you're competing against each other," he said. "You're competing with the existing ways of doing things."
Dan Schatt, a senior analyst for the Boston market research firm Celent LLC, said the U.S. market for peer-to-peer lending is still nascent, and Zopa's planned expansion "is more of a validation that the market exists. It's more helpful, if anything, to Prosper."
Zopa and Prosper, also of San Francisco, are trying to change the basic model of consumer lending; rather than borrowing from a bank, people can borrow from one another. Both have created Web sites that join borrowers and lenders, who earn interest on the money they lend, often at much better rates than they could earn from letting the money sit in a bank account.
Zopa's U.K. site went live March 7, 2005 and now has 140,000 users; Prosper went live 11 months later in the United States and has 225,000 users, according to data provided by each company. Because neither has ventured beyond their initial markets, they have pursued entirely different customer segments. Zopa also plans to start offering its service in other countries soon, but Mr. Dolton would not say which.
Though both have similar models, there are a few key differences, notably in how loans are distributed. Zopa lets lenders select different loan lengths, but their funds are automatically distributed to any eligible borrowers, vetted by the company.
With Prosper, lenders must lend their money out for three years, but they get to choose the borrower. Last month, marking its first anniversary, Prosper unveiled several new features. It set up a question-and-answer forum, attached to each loan request, which enabled prospective lenders to interview borrowers. The site also started including more information about borrowers, such as employment history, which helps lenders decide whether the borrowers are good risks.
Prosper has also narrowed its pool of borrowers, eliminating those whose Experian Scorex Plus credit rating dipped below 520, or those without scores.
As CEO, Mr. Dolton fills a void that was created in October, when Zopa's co-founder and first CEO, Richard Duvall, died of pancreatic cancer. James Alexander, who was originally Zopa's chief financial officer, took over then as interim CEO and remains the chief executive of its U.K. operation.
Zopa has been building its U.S. team in San Francisco for some time in anticipation of its U.S. launch, and Mr. Dolton said he was approached last year by Mr. Duvall to work with the U.S. team. That relationship led to his hiring as CEO.
If Zopa's U.S. site follows the model the company is using in the U.K., Mr. Schatt said that it might hold more appeal for risk-averse lenders than Prosper. Zopa employs credit analysts who evaluate the pool of loan requests to weed out the bad bets.
Mr. Schatt has tested Prosper's site by lending money through it in the past month, and says he plans to do so through Zopa once it opens shop in this country.
However, he also said that Prosper may have an advantage in the United States simply because it was available here first. "These are marketplace-oriented services, so first movers can potentially do much better," he said.
