Zopa needs cash pumping of £130m to turn into bank

BRITISH online lender Zopa is on its way to agree to sell a majority stake to an American private investment business for cash.

The peer-to-peer lender is close to agreeing to £130 million in funding as it aims to turn into a lender before the deadline of Tuesday (3).

The Jaidev Janardana-led firm is understood to be in advanced discussions to sell a majority stake to the British arm of IAG Capital.

IAG Capital is already a shareholder in the financial firm.

Other backers of the firm are reportedly responding to the funding round as retaining the banking licence, which is seen as crucial for the company.

The financial company requires cash so that restrictions can be lifted on the conditional banking licence it obtained last year.

If the plans move ahead as scheduled, then Zopa will get an opportunity to offer products such as deposit accounts and credit cards.

If it fails to secure the funds by tomorrow, the banking licence is expected to be revoked.

The peer-to-peer (P2P) lending company was founded in 2005 to give people access to simpler, better-value loans and investments.

The online platform links consumer borrowers with people willing to lend them money.

Zopa has lent about £5 billion to half a million borrowers and has generated £250m in interest for ordinary investors.

It turned a £145,000 pre-tax profit in 2018.

The peer-to-peer industry has struggled to prove the viability of the model.

Zopa’s plans to become a bank have been described as an entry to failure, as peer-to-peer lending was founded on the principle of reducing middlemen and avoiding complexity.

It has been a turbulent time recently for the sector.

The company has a staff strength of 500 and is among Britain's largest financial technology firms.

Last year, Zopa said it would start a fixed-term savings product protected by the Financial Services Compensation Scheme, credit card, and a money management application in 2019.