Introduction of the Case

Zopa.com is the world's first peer-to-peer lending platform, promising to improve financial
services by providing individuals with easier, better-value loans and investments. Zopa is a
British internet-based lending company founded in 2005 by Richard Duvall, James Alexander,
and David Nicholson. It presently has 75,000+ active investors who have given over £3 billion to
borrowers.

The Zopa business idea is to connect people who want to borrow money with others who want to
lend money. The lender divides the money among at least 50 borrowers and charges them 1% of
their loan as a fee. This is significantly less expensive, and it gets even less expensive when you
borrow more and for longer periods, as opposed to banks.

Borrowers who are having trouble obtaining credit ratings from traditional financial services
providers are the company's target market. If there are no bad loans, lenders can earn larger rates
than they do with savings accounts. The company was created mostly for "Free formers."
Consultants and entrepreneurs are examples of free formers who are self-employed or work on a
project-based or freelance basis. As a result, despite their inconsistent earnings and lifestyles,
they may be considered creditworthy. They are, according to James Alexander, the individuals
who are misunderstood by banks, which prioritize financial stability and revenue over everything
else. We attempted to summarize Zopa's business model and how it operates.

This case study examines an organization's growth tactics, as demonstrated by Zopa's entry into
the retail banking market. Zopa was the first peer-to-peer (P2P) lending firm when it began in the
United Kingdom in 2005. Peer to peer lending is an online platform that matches a potential
borrower with an investor prepared to provide a personal or investment loan. Zopa's business
strategy was the world's first of its type, based on the company's ideals of honesty, openness, and
trust. Following the global financial crisis of 2008-2009, traditional banking was no longer a
popular source of financing, as bank demand for lending plummeted. Borrowers became
increasingly interested in P2P lending since it was a less expensive and more accessible option.
Zopa is one of the businesses that has weathered the storm and emerged as a market leader that
consumers and investors can rely on as a P2P lending platform. With continuing development
and success, Zopa chose to expand by entering the retail banking market, allowing the firm to
join existing companies such as Starling, Monzo, and Atom, who had previously established
themselves as online digital banks in the UK.

Issues Analysis and Solution

Problem 1: -

What are Zopa's main strengths that allow the company stay afloat in the
market?

Solution Analysis and Comments

 The economic concept of peer-to-peer lending, the facility may be able to offer borrowers
cheaper charges on the system (e.g., lower facilitation fees and banking fees)
 The 'Free formers' are a highly specialized target market for Zopa. Free formers include
consultants and entrepreneurs who are not employed full-time, are self-employed, or
perform project-based or freelance work.
 It provides borrowers with a reduced interest rate while providing lenders with a better
rate of return.
 The company's stability and established clients, both lenders and borrowers, accumulated
since its inception in 2005
 Customers' credit rating history in detail Not only can Zopa help lenders and borrowers in
its home nation of the United Kingdom, but it can also help lenders and borrowers all
around the world who want to experience peer-to-peer lending.
 The loan facility is a focused sort of product. Other banking or insurance services are
available to Zopa (e.g., Bills purchase, Letters of Credit, Assignment of Receivable, etc.)
 Lower operating costs and reduced market risk for both lenders and borrowers are driving
the growth of the global peer to peer lending industry.
 Furthermore, compared to traditional banking systems, digitization in the banking
industry promotes transparency, which is expected to fuel market development.

Problem 2

What are the benefits and risks of Zopa's entry into the retail banking sector?
Solution Analysis and Comments

The risks and possible advantages of Zopa's retail banking diversification are:

Potential benefits:

 Zopa's move into retail banking would allow the company to roll out new products such
as a fixed-term savings account protected by the Financial Services Compensation
Scheme, a credit card platform, cutting-edge billing engine, and an Open Banking hub
that gives customers a convenient platform to manage their finances.
 The Zopa retail bank is a substantial addition to the company's current P2P business
(Zopa Limited) and adds to the Zopa Group's expanding portfolio. The associated
diversification aids Zopa's expansion into digital retail banking, enhancing the company's
reputation for digital technological innovation, stability, and prudence in the P2P lending
market. 
 Zopa's development and success may be attributed to its organizational ideals of trust,
fairness, and openness, as well as its first-mover advantage as the world's first P2P
lending firm.

The following are the risks of Zopa entering retail banking:

 With a diversified growth plan, more money would be required for marketing and
product/service awareness efforts, which are critical, particularly during the early phases
of a new product/service introduction.
 Direct competition from major competitors like as Starling, Manzo, and Atom, who are
already well-established online digital banks in the UK.
 Despite predicted expansion, the case study reveals that the P2P lending sector continues
to confront a volatile market environment. The highly regulated, volatile, and highly
regulated environment may have prompted Zopa to explore expanding its portfolio with
related financial services by diversifying into the retail banking industry.
 In the case of a protracted downturn in economic development, the sector's risk
management systems, loan servicing, and recovery policies are likely to be put to the test.
  The Financial Conduct Authority (FCA) has strengthened its regulatory framework,
introducing new regulations such as capital requirements to safeguard investors and
ensuring that retail banks and lending platforms operate sustainably.

Problem 3

What marketing strategies has Zopa employed to beat its rivalries as a first mover
advantage?

Solution Analysis and Comments: -

Market Penetration –

 The comfort zone for a business to expand with current products/services (e.g., P2P
service), especially in the present UK market, is market penetration growth strategy.
 Zopa's development and success, particularly in the UK market, is based on its
organizational values of trust, fairness, and openness, as well as its first mover advantage
as the world's first P2P lending firm.
 Zopa's market dominance stems from its reputation for digital technological innovation,
steadiness, and prudence in the P2P ending industry.
 Customers may be gained from rivals via a market penetration expansion approach.
 This is less hazardous, but competitors like as Starling, Monzo, and Atom, who are
currently functioning as online digital banks in the UK, pose a greater danger.

Market Development

 A growth strategy based on the creation of new markets for current goods and services.
 This aids in the expansion of existing products/services into new market groups and
geographic areas.
 It will be risky, particularly during the early phases of a new market entrance, when
market research and development, as well as brand recognition, are critical.

Product Development
  A growth strategy focused on the creation of new products/services or the modification of
current ones to fit a specific market.
 Zopa's move into retail banking will allow the company to expand by launching new
products such as a fixed-term savings account protected by the Financial Services
Compensation Scheme, a credit card platform, cutting-edge billing engine, and an Open
Banking hub that gives customers a simple way to manage their finances.
 This is particularly risky in the early phases of a new product introduction, when more
marketing and product/service awareness initiatives are required.

Diversification (related or unrelated)

 Zopa's expansion into the retail banking industry with related goods and services. The
Zopa retail bank was a substantial addition to the company's existing P2P business (Zopa
Limited), contributing to the Zopa Group's increasing portfolio.
 Diversification also allows for inorganic development through strategic alliances like as
joint ventures, horizontal and vertical integration, mergers and acquisitions.
 The riskiest growth approach, yet with a significant potential for portfolio growth.

Problem 4

How does the Zopa business model add value both the client and the market?

Solution Analysis and Comments: -

As a value creator, Zopa stands out. In a company like banking, where there is a well-established
way of doing things, Zopa adds value by handling transactions differently. By removing the need
for customers to cooperate with traditional financial institutions in order to obtain credit, Zopa
adds value to their lives. It also removes many of the face-to-face contacts and manual processes
that have previously been part of the borrowing process. Customers benefit from the company's
increased flexibility and transparency, since they can borrow lesser sums for shorter periods of
time and are not charged additional costs if they refund early.

By slicing the variety of goods and services available, Zopa delivers value to the financial
services business (and people who wish to lend money to others). Furthermore, Zopa is able to
lower the prices and levies generally connected with borrowing because to its low-cost structure.
In the meantime, Zopa's low-cost structure allows it to boost interest rates for lenders while
simultaneously giving them the impression that they are actually assisting people in need. This
notion is neatly incorporated into the Zopa motto of "economic return and social reward," and it's
a concept that can be demonstrated and understood immediately.

Problem 5

How does Zopa use e marketing to innovate their products?

Solution Analysis and Comments: -

Zopa has created a value innovation in the financial services business that the firm will be able to
profit from. For determining a firm's resources and long-term competitive advantage. The
situation Physical resources, human resources, and organizational resources are the three types of
corporate resources. Specific technology, plants and equipment, geographic location, and raw
material availability are all examples of physical resources. Individuals in a company's human
resources include their training, experience, judgment, intellect, relationships, and insights.

The formal reporting structure, the formal and informal planning-controlling-coordinating

processes, as well as informal interactions among groups within and outside the corporation,
such as the customer base and the value of the brand, are all examples of organizational
resources. I believe that these various sorts of resources must be (1) valued, (2) scarce, (3)
difficult to mimic, and (4) difficult to substitute in order to be sources of competitive advantage
(or even persistent competitive advantage). The company's deep customer knowledge, strong
networks in the financial services unique software parts, creative and informal structure, installed
client base, and brand equity may all be considered as useful when they employ e marketing to
promote their brand.
Conclusion to Zopa Company
If I were a consultant analyzing Zopa Firm's performance, I would advise them to first develop a
competent customer care center, as this is a critical component of any business nowadays. Good
customer service will result in some referrals from consumers who have been impressed by the
communication. They should also give lenders additional security because their funds are always
at danger. Zopa has accomplished value innovation in the retail financial services market as part
of the new Web 2.0 phenomena. Many people believe Zopa is well-positioned to turn a dream
enterprise into a viable reality. Despite this, we have reservations about Zopa's capacity to
maintain a competitive edge in the long run.

While many of Zopa's resources and traits are important and (for the time being) unique, they
appear to be susceptible to future copying or substitution, potentially by someone with far bigger
resources. Whatever happens to Zopa, the peer-to-peer lending concept that it pioneered will
continue to exist.

Introduce a new Zopa Listings product or service – Launching a new product and
promoting its characteristics, superior value proposition, and originality are all typical
marketing mix functions.
Increase Zopa Listings market share - Marketing initiatives may be utilized to boost
market share by increasing sales to new customers or increasing sales to existing
customers.
Bring in new consumers to Zopa Listings – This might include releasing a new version of
a product that appeals to a different customer category or expanding into new markets.
Increase Zopa Listings sales - The purpose of marketing initiatives is to boost sales of
current items. It might entail identifying a new target market or repositioning an existing
product to appeal to a new market.
References For Additional Research
https://www.marketingweek.com/zopa-fintech-taking-on-the-big-banks/

https://www.zopa.com/blog/article/zopa-launches-new-digital-bank-offering-consumers-a-
compelling-alternative-when-they-need-it-most

https://www.theguardian.com/money/2021/dec/11/zopa-peer-to-peer-lending-p2p-money

https://www.pon.harvard.edu/daily/business-negotiations/how-to-find-the-zopa-in-business-
negotiations/

https://www.altfi.com/article/3590_from-peer-to-peer-to-here-three-issues-that-zopa-must-solve