Two of the country’s prime challengers to the high street banking status quo have struck a cooperation deal, with Metro Bank agreeing to invest millions of pounds of its depositors’ savings a month into peer-to-peer lending site Zopa.
Zopa is an online platform where savers – mainly members of the public – invest money which is then lent out to borrowers in the form of personal or small business loans, bypassing traditional banks.
Under the deal, Metro Bank will join the fray of investors putting money into Zopa’s network alongside the online platform’s existing savers.
The deal gives Zopa instant access to far more cash to lend and, although it is relatively small in UK banking terms, sees Metro becoming the first high street bank to invest directly into peer-to-peer lending.
For Metro, it means P2P loans become another asset class in which to invest deposits in the hope of securing higher returns.
Giles Andrews, the chief executive of Zopa, said: “This brings together two key challengers to the traditional financial services landscape.” It marks an acceleration by bigger institutions eager to pump money into P2P lending.
Zopa’s rival, Funding Circle, has previously struck partnership deals with RBS and Santander whereby the banks will refer small business customers to the P2P site.
In the US, institutions like hedge funds have moved aggressively into the market, to the extent that about 98 per cent of all P2P lending is now from big corporate investors.
The hedge funds Marshall Wace and Victory Park have been, or are planning to raise funds on the London Stock Exchange to pump money into P2P lenders here.
At Zopa, only 30 per cent of its funds are from institutions. A spokesman said it wanted to continue being largely a platform for retail investors but that the Metro deal could be the first of a number of deals with other banks.
P2P lenders have grown after the financial crisis when traditional high street banks were refusing to lend to small businesses. The industry is still tiny in proportion to overall UK lending but is growing rapidly.