Zopa launched a credit card and savings account last year, hoping to capture a larger share of the British retail banking market
British online lending start-up Zopa has raised $300 million in a funding round led by SoftBank, adding to the soaring investment flowing into Europe’s booming financial technology sector.
The company is now valued at $1 billion following the fresh cash injection, according to a source familiar with the deal, making it the latest European fintech to achieve unicorn status. The source preferred to remain anonymous as the information has not been disclosed publicly.
Zopa launched a credit card and savings account last year, hoping to capture a larger share of the British retail banking market and take on giants like Barclays and HSBC. It’s so far netted £700 million ($961 million) in deposits and attracted 150,000 credit card customers.
We are growing our balance sheet rapidly, Zopa CEO Jaidev Janardana told CNBC. What this capital allows us to do is to accelerate that trajectory of growth.
Zopa is more sustainable than rivals, Janardana said, adding that the firm is on track to reach profitability within 10 weeks. This, along with Zopa’s use of artificial intelligence (AI), was a key factor behind SoftBank’s investment, he added.
Softbank share this belief that by using technology and AI a lot more, we are able to scale faster and compete with the incumbents because we bring both cost advantage and the advantage of making precise decisions, Zopa’s CEO said.
Zopa said it generated net operating income of £21.9 million in the first half of 2021, more than double what it made at the end of 2020. The firm expects to more than double revenue this year.
Janardana believes Zopa will eventually become one of the U.K.’s “Big Four” lenders.
Our view of the competition hasn’t changed much — it remains the big legacy banks, he said.
Zopa said the latest fundraising would be its last before a planned initial public offering.
Janardana is aiming to take the business public by the fourth quarter of 2022. But a stock market debut will only happen once Zopa has shown a consistent track record of profitability, he said.
Given the capital we have raised, it gives us flexibility about going then or a bit later, depending on market conditions, Janardana said, adding that the London market was a “natural place for us” to list.
Along with SoftBank, Zopa’s latest investment round was backed by Abu Dhabi-based asset management firm Chimera Capital and existing investors including IAG Silverstripe, Davidson Kempner and Northzone.