U.S. Zopa Model of Social Lending Is a Victim of the Credit Crunch
SAN FRANCISCO -- The U.S. Zopa model, heralded a year ago as an innovative membership tool to attract a youthful audience from YouTube and Facebook, is headed for the scrap heap.
However, some of the six pioneering CUs are still hoping to save the social lending vehicle. Peer-to-peer lending "still has a place for the industry," even if loan volume turned out "miniscule," declared Forum CU of Indianapolis in explaining the end of the Zopa experiment on its Web site (www.forumcu.com).
Holding out hope of resurrection, Forum said a CUSO "or a centric type of organization" might be formed in the U.S. to serve the online segment despite the economic crisis, which was seen by some participants as killing the venture.
Forum stressed that the Zopa closure would have "no impact to members participating in the program as their insured certificates of deposit and their personal loans will be transferred to the credit union for servicing."
Doug Dolton, global CEO of the British-based Zopa, explained in e-mails sent to the six pilot CUs that loan applications once processed by Zopa will now be routed online "directly to our credit union partners."
In addition to Forum, other CU participants included USA FCU of San Diego; Addison Avenue FCU of Palo Alto, Calif.; Affinity Plus FCU of St. Paul, Minn.; First Technology CU in Beaverton, Ore., and Provident CU in Redwood City, Calif.
Dolton told Credit Union Times that the Zopa investor-borrower venture that debuted in the U.S. in December 2007 fell victim to "unprecedented conditions," experiencing weak volume as compared to the active business model in the U.K. and Italy.
Under the original transaction setup, participants had to become CU members in any of the six CUs to take part. Dolton said the Zopa Web site (https://us.zopa.com/) remains intact for use by U.S. consumers.
Mary Cunningham, president/CEO of USA FCU in San Diego, said, "as one of the six original beta test credit unions here in the U.S., we have no regrets about being a part of this exciting venture." USA FCU jumped aboard "because we were intrigued about the possibility of building a totally electronic platform for serving members all over the country and world."
Yet, "the plug was pulled," she said, by the venture capitalists running the operation as results "have fallen short of their expectations."
The Zopa concept fit USA "perfectly as a military-based organization that only has 20% of our members in San Diego County," said Cunningham.
"When we first received word from Zopa about discontinuing the operation, we bandied about the idea of forming a CUSO with the other credit unions to purchase the online lending platform and continue the operation," she said.
While participants "still feel that the idea has merit, we've all decided that financially, it just isn't a good time for us," said Cunningham.
So USA will now perform "a manual conversion of the members we've acquired through Zopa to our mainframe system and then it will be business as usual."
Forum in Indianapolis said also timing was a factor given the economic meltdown in building loan volume.
"There will be no impact to the members participating in the program," said Forum, detailing the CD/loan transfer to the CU, adding, "the decision to exit was made by Zopa and is not reflective of the credit union's ability to participate."
Forum said the CUSO idea still can be considered to allow continuation of the program but if so "it won't take place without a gap in service."
"Zopa," said Forum, "never could gain the traction they needed here in the U.S." with the latest turn in the economic climate "likely the last straw and thus their quick decision to exit." Still, "they were prudent with their promotion of the program and the pilot program," according to Forum.
Taking a countering perspective, Elko, Nev., CU branding strategist Jeff Pilcher suggested the Zopa model was flawed from the start since it was "complex and difficult to understand."
The "introduction of credit unions into the model was odd and probably hard for people looking for a pure P2P experience to accept," said Pilcher, publisher of the Financial Brand and who also has worked for Seattle-based Weber Marketing Group.
"I don't think Zopa's exit had anything to do with the economic meltdown," he declared.