Giles Andrews is not an accountant, he insists as we arrange our interview.
But in some ways, you wouldn’t expect him to be. As the CFO of social lending
exchange ZOPA, a start-up challenger to the banking industry, you’d expect him
to be a former management consultant, or something along those lines. However,
he’s not quite a management consultant either. Andrews met one other key member
of the ZOPA management team doing an MBA at INSEAD (so he almost is). He spent
ten years working in the motor industry, helping create a chain of car
dealerships turning over £250m among other things.
Andrews and his colleagues are now at the forefront of what they hope will be
a consumer revolution in financial services. Their business aims to cut out the
middle man of banking, allowing individuals to borrow and lend between each
other, without dealing with the poor returns and high charges of the high street
banking sector. They hope, no less, to profit from the disenfranchisement of the
masses from the corporate world.
‘It’s an interesting consumer trend – borne out in some ways by the people
who work for us. They’re disenfranchised by many of the institutions of society.
They don’t trust the model our parents trusted. They’re less keen on the
corporate model of working, earning a salary, spending it and retiring, then
getting a pension and spending it.’
They are, he says, a more self-reliant generation. ‘It’s part of the rise in
people taking control of their financial situation and not relying on others.
When they book holidays, they don’t buy packages. They don’t buy albums, but
individual songs from iTunes. They’re more choice-conscious. The offerings banks
provide don’t have much relevance to those consumers.’
He paints an attractive, rebellious picture that almost makes you want to
rush out and get a ZOPA loan – join in the revolution. Then, he says, ‘you can
earn interest from people rather than from a faceless institution, knowing you
are contributing to city people’s bonuses’.
That, certainly, will strike a nerve with many. The banking industry in the
UK is at a key juncture, under attack for its penalty charges on overdrafts, the
remuneration of top bankers (more often working in the investment banking side,
it ought to be noted), and a feeling that the system works for fat cats rather
than for its customers.
Spot the difference
ZOPA’s premise is different. It introduces lenders and borrowers. Its title
is an acronym for ‘zone of possible agreement,’ the place where lenders and
borrowers meet. Using web technology developed over the dot.com boom and now a
viable business model, lenders put up £20,000, for instance, on its website, the
money is diversified over hundreds of different loans and parcelled out to
No deposit appears on ZOPA’s balance sheet and it defiantly rejects being
labelled as a bank, calling it one would be a terrible faux pas.
So how do its rates compare? Pretty favourably, as it happens. Money
supermarket.com, which compares the prices of financial products, has ZOPA’s
£5,000 loan over three years as its best buy. Change the variables and you might
get a different answer, but to top any table in a market as competitive as the
UK’s is not bad going for a business that only recently celebrated its second
The youthfulness of the business is something that is hard to get away from.
Five minutes into our discussion, soft drinks brand Innocent drinks turns up
in conversation. The smoothie maker has a lot in common with ZOPA. Both recent
start-ups and challengers to big business in the UK, they have similar
counter-cultural resonances. They are businesses, ultimately, with a socially
Was Innocent drinks a model? An inspiration? ‘I don’t think they were a model
but they are a really good business. They’ve achieved an enormous amount.’
Andrews accepts there are parallels but doesn’t really want to be drawn any
As a ‘cosy, friendly start-up’ there’s one thing ZOPA does have to do that is
neither cosy nor friendly: chasing up bad debts. ‘We pursue debts as
aggressively as any lender. To our borrowers we make a lot of the fact that
their lenders are real people.’
ZOPA passes on bad debt details to credit agencies, meaning borrowers are as
badly affected by defaulting as they would be in conventional banking: ‘We
pursue things if necessary through the courts. We wouldn’t want anyone to think
we are a soft touch.’
ZOPA runs a low level of bad debt at just 0.05%. Partly, it seems that this
is something to do with the fact they are pitching to a socially aware and
possibly better-off demographic, but it’s also because they’ve been careful.
When the business launched, it was targeted by a large group of borrowers who
thought it was easy money, and either couldn’t or wouldn’t have repaid. ‘We
turned down a very high proportion of the borrowers in the early days,’ Andrews
And even when it is being nasty, there is a crucial difference between it and
the banks. ‘We don’t optimise our revenues through [our bad debt collection].
That’s what the banks have a bad reputation for.’
The business is about to break even in the UK, with over 130,000 members, and
is on the point of launching in the US, in Italy under franchise, and is in
talks around the world to launch other exchanges.
It is in the midst of celebrating its two year anniversary (which falls this
month). The member community, Andrews says, will be involved with the
The business opportunity is that ZOPA is a very low fixed costs business. ‘It
breaks even at tiny volumes compared to the market opportunity. And it becomes
very profitable at scale,’ says Andrews.
Billion pound market
The market is huge, worth many billions of pounds. ZOPA is currently only
targeting a small part of the general banking sector in its pursuit of unsecured
borrowing. It doesn’t offer mortgages, and won’t solve your dissatisfaction with
your high street bank account.
But it has, as Andrews is keen to point out, introduced a new asset class.
Whereas previously, only institutional investors could really buy consumer debt
through securitisations, now retail investors can buy into it.
ZOPA hopes that IFAs will eventually recommend that investors, in
diversifying their investments, will choose to have ‘a bit of ZOPA’ in their
portfolio. But it’s not an easy sell, since IFAs tend to sell on commission
(another reason to dislike the UK financial services industry). ZOPA does not
have the margins at the moment to manage that.
‘An issue in the IFA world is that we are a low margin business but we are
working hard on this as an introductory channel, and they have never had
anything like ZOPA to offer before,’ he says.
The challenge at ZOPA will be, Andrews says, to ‘maintain the difference
whilst retaining the trust.’ That seems exactly right. It would be easy to see,
with venture capitalists eager for an exit, the business sold to a high street
player. A disillusioning prospect like the sale of Green & Black’s to
But for now at least, the cynicism is on hold.
A serious business
ZOPA is in every sense a very serious business. It is backed by three venture
capital firms, Bessemer Venture Partners, Wellington Partners and Benchmark
Capital. The three have significant experience of internet ventures in
particular, having backed Skype and eBay, to name just two.
Andrews, like his colleagues, is clearly experienced in business too. But
whereas many of those who started ZOPA came from Egg, the pioneering internet
bank, he worked in the car industry. ‘I went to Oxford, and then spent ten years
in the motoring industry, having a passion for motor cars. Halfway through that
I set up a business [Caverdale Group] with a group of other people buying up car
dealerships, which we sold in 1997.’
When he talks about his career he talks, as many do in start-ups, of the
passion for the idea. ‘I’m fascinated and passionate about the business
opportunity, and I like to do things I’m passionate about.’ That makes up for
the sometimes long hours. ‘The perception is you are working for yourself,
choosing to do it, and that makes it more fun. Most people involved in start-ups
You can’t pin a career plan on him either. ‘I’ve never managed my career in
that manner. I’ve always done things that have come along that looked
interesting, and have no idea what I would do next. Find an interesting group of
people doing something interesting, and probably work in a financial role.’Not
the next finance director of HSBC, then? ‘I don’t think they’d have me,’ he
To read more about ZOPA go
To compare prices of financial products visit
Innocent drinks‘ website is also worth a look at
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