I’m tardy in posting on Zopa US. In a nut shell, their system here works in the following way:
- You buy a CD from a credit union, which you have to join.
- I take an unsecured personal loan from the credit union, which I have to join.
- If you like me or my project you can contribute interest from your CD to reducing my interest payment.
- Zopa earns fees originating loans and servicing them. Do they also earn a fee for each new credit union member?
- The credit union earns the spread between the CDs and the rate on the unsecured personal loan.
- The credit union takes the risk of loss.
- Presumably the credit union offers both of us additional products making this potentially a lower cost member acquisition channel for them.
- To the extent that CD’s exceed underwritten loans, the credit unions have a new source of deposits.
I like the participation of the credit unions and the potentially viral nature of getting family and friends to subsidize a loan, but I think we’ll have to wait and see how Zopa and the credit unions extend the platform before we really know the potential of the model.