Zopa bank profitable after just 21 months

App-based Zopa Bank has become profitable, just 21 months after achieving its UK banking licence in June 2020.

Its initial profit is expected to be below £1m for the month of March, and the bank expects to be profitable moving forward.

The bank emerged from peer-to-peer lending pioneer Zopa, after the company announced its plans to become a bank in 2016. It closed its peer-to-peer lending business in December 2021 to focus on its digital bank offering.

Initially, Zopa Bank has concentrated on the savings market, offering an account that can be set up in seven minutes, with its banking services available on the Zopa app, which was launched in 2018.

Since its launch in 2020, customers of the bank have made deposits worth £1bn, it has loaned more than £1bn and has issued more than 250,000 credit cards.

Zopa Bank CEO Jaidev Janardana said: “Hitting profitability in just 21 months is a testament to our unique model that meets customer needs by focusing on how they borrow and save – the two things with the most impact on finances. Today’s news makes Zopa one of the fastest digital banks to achieve profitability ever and reinforces our thesis on the importance of sustainable growth as a catalyst for accelerated product and market expansion.”

There is a heavy tech investment required to establish a digital bank, as well as the need to carry out extensive marketing. As a result, they take many months and even years to become profitable. Zopa Bank has benefitted from the experience of the Zopa peer-to-peer lending business, which began life in 2005 as one of the first of its kind. It saw huge growth, making the company a fintech unicorn in 2021, after reaching a $1bn valuation.

Zopa was designed to use the latest technology, such as machine learning, to give customers experiences similar to using the likes of Netflix and Amazon. It decided to build the tech platforms for its banking products in-house because of its extensive internal tech talent, with experience in building a peer-to-peer lending platform.

In July 2019, Zopa told Computer Weekly that it wants to create a bank that will suit people at different stages in their lives. It said the ethos was to make things easier and reduce operating costs through technology and pass on the savings as better products, such as savings accounts with higher rates.