The press release
Social Lending cutting out the
banks
New study shows that Brits are looking for an alternative to high interest rates – Social Lending over the internet
19 December 2006 - Big banks watch your backs, the British public is looking for an alternative, with 74 per cent of Britons stating they would consider either getting a loan or lending money through a social lending community, rather than their high street bank, according to a new study.
While the study found that people who used high street banks thought they were necessary for general everyday banking, 49 per cent stated that they feel that banks do not have their customers’ best interests at heart, 81 per cent agreed that the banks are self interested and 76 per cent strongly agreed that the banks are greedy.
‘Internet-based Social Lending’, an in-depth study by the Social Futures Observatory, looked at the growing phenomenon of Social Lending. Borrowing and lending money person-to-person, rather than through a bank is an age-old concept, but in the past has normally taken place in private – through friends, family or other close-knit social groups. Social Lending, now facilitated by the Internet, is emerging as a new financial category of genuine importance. Social Lending is when people lend and borrow money, side-stepping the banks in order to get better loan rates and better returns than their savings account, and a fairer deal for everyone.
The study found that Social Lending is growing in popularity, much like other social networking sites that have seen huge growth with the likes of LinkedIn, YouTube and MySpace. The reasons for this are due to the increased transparency and connectedness with others that comes from lending to and agreeing loans amongst like-minded people. Just as importantly, it offers people strong financial benefits – higher rates of return on investment for lenders, and a lower rate of interest than is offered by banks for borrowers.
The study looked at a number of Social Lending players, and used Zopa, the online marketplace where people meet to lend and borrow money, as a case study. Zopa, which was set up by many of the team that launched Egg, currently has 105,000 members in the UK.
According to Professor Michael Hulme, who authored the study, "Traditional Banking emerges from this report as almost some form of necessary evil. For most people banking does not provide any form of rewarding or valued experience it is simply a necessity. In contrast to this the Community Sites we looked at appeared to offer a much deeper appreciation of the individual that went far beyond the actual transaction."
James Alexander, co-founder and CEO of Zopa, believes that not only are people looking for a better financial deal, but also for a way to make their money human again. “We’ve seen a strong return to ethical values in recent times, with many of us concerned about the impact we, and the organisations we deal with, are making on the community we live in. Lending and borrowing money from real people online, through marketplaces such as Zopa, allows people to get a much better financial deal than what’s on offer on the high-street. People are already seeing the benefits – for example, those lending at Zopa have since launch received about a 50% better rate of return on money they’ve lent out than if they’d left their money in the best savings accounts such as ING Direct or Egg.”
According to the survey, 64 per cent of people who use high street banks felt it was important that their banks provide a service that enables social interaction and community participation, yet only 13 per cent felt their bank significantly enabled either of these things. Additionally, 56 per cent said that the more social and interactive features of Social Lending would be a significant factor in their decision to use a Social Lending scheme and 18 per cent stated that investing in people rather than institutions would motivate them to use Social Lending marketplaces such as Zopa.
About the study
The study, ‘Internet Based Social Lending: Past, Present and Future’ by the Social Futures Observatory took place over a period of six months. It combined extensive desk research and empirical research consisting of qualitative interviews and two separate independent studies - one amongst Zopa members exploring their attitudes towards Zopa and more mainstream banking, the second survey amongst a general sample of mainstream banking customers.
In total, 1,000 people were surveyed and 20 qualitative interviews took place.
The study is divided into three broad sections. The first helps to trace the more traditional notions of Social Lending and defines the term. The second examines several broad socio/cultural themes underpinning the re-awakening interest and activity in Social Lending. The third is a case study of Zopa.
The complete 116-page study can be downloaded from http://www.socialfuturesobservatory.co.uk
About Social Futures Observatory
The Social Futures Observatory is an independent 'think tank' closely associated with the Institute for Advanced Studies at Lancaster University. At its heart lies a philosophy of collaborative, community-based research bringing together a wide range of researchers and practitioners to think about and explore the challenges facing society over the next 10 years and beyond.
Supported by multi-disciplinary groups of academics and commentators we work closely with individuals and organisations actively initiating change and operating within changing environments, to help provide clear accounts of what actions taken today may imply for longer term futures.
About Zopa
Zopa is the online marketplace where people meet to lend and borrow money. Lenders get great returns and borrowers get low-cost loans. With no bank in the middle, both parties get better rates.
Zopa makes money human again - lenders can see where their money's going and borrowers, where their money's come from.
Lenders are enjoying a smart way of getting a return, alongside their savings and investments. Some lenders are earning up to 14% pa, and the average return on all money lent to date is 6.75% pa (figures are before tax, but after bad debt and fee).
Borrowers are finding it a fair and human way of getting a low-cost loan. They are enjoying market-leading rates, with a typical APR of just 5.2% (based on £5,000 over 3 years in the A* market), and the flexibility to repay their loan early at no extra cost.
To protect lenders' money, Zopa uses all the safety measures banks use, plus a few more. All borrowers are identity-checked, credit scored and risk-assessed, and anybody lending £500 or more has their money spread across at least 50 borrowers.
Zopa was set up by many of the team that launched Egg, and is backed by the same investors that backed eBay, Betfair and Skype. Since launching in the UK in March 2005, over 105,000 people have joined.
Zopa was voted “Internet innovation of the Year” at the CNet Technology Awards in October 2006, and in the same month was named by Business 2.0 as 1 of 11 disruptive companies “whose breakthroughs will change everything.” In August 2006 Zopa was given 5 stars from What Investment Magazine, the first time they've given a perfect score in years.
Zopa Ltd is authorised and regulated by the Financial Services Authority as a general insurance intermediary, holds Consumer Credit Licences from the Office of Fair Trading, uses the same processes and fraud prevention systems as banks (including Equifax, Experian and Call Credit for credit rating), and is a member of the Finance and Leasing Association.
Zopa stands for Zone of Possible Agreement. It is the overlap between one person’s bottom line (the lowest they are prepared to get for something) and another person’s top line (the most they are prepared to give for something).
Zopa can be found at http://www.zopa.com
New study shows that Brits are looking for an alternative to high interest rates – Social Lending over the internet
19 December 2006 - Big banks watch your backs, the British public is looking for an alternative, with 74 per cent of Britons stating they would consider either getting a loan or lending money through a social lending community, rather than their high street bank, according to a new study.
While the study found that people who used high street banks thought they were necessary for general everyday banking, 49 per cent stated that they feel that banks do not have their customers’ best interests at heart, 81 per cent agreed that the banks are self interested and 76 per cent strongly agreed that the banks are greedy.
‘Internet-based Social Lending’, an in-depth study by the Social Futures Observatory, looked at the growing phenomenon of Social Lending. Borrowing and lending money person-to-person, rather than through a bank is an age-old concept, but in the past has normally taken place in private – through friends, family or other close-knit social groups. Social Lending, now facilitated by the Internet, is emerging as a new financial category of genuine importance. Social Lending is when people lend and borrow money, side-stepping the banks in order to get better loan rates and better returns than their savings account, and a fairer deal for everyone.
The study found that Social Lending is growing in popularity, much like other social networking sites that have seen huge growth with the likes of LinkedIn, YouTube and MySpace. The reasons for this are due to the increased transparency and connectedness with others that comes from lending to and agreeing loans amongst like-minded people. Just as importantly, it offers people strong financial benefits – higher rates of return on investment for lenders, and a lower rate of interest than is offered by banks for borrowers.
The study looked at a number of Social Lending players, and used Zopa, the online marketplace where people meet to lend and borrow money, as a case study. Zopa, which was set up by many of the team that launched Egg, currently has 105,000 members in the UK.
According to Professor Michael Hulme, who authored the study, "Traditional Banking emerges from this report as almost some form of necessary evil. For most people banking does not provide any form of rewarding or valued experience it is simply a necessity. In contrast to this the Community Sites we looked at appeared to offer a much deeper appreciation of the individual that went far beyond the actual transaction."
James Alexander, co-founder and CEO of Zopa, believes that not only are people looking for a better financial deal, but also for a way to make their money human again. “We’ve seen a strong return to ethical values in recent times, with many of us concerned about the impact we, and the organisations we deal with, are making on the community we live in. Lending and borrowing money from real people online, through marketplaces such as Zopa, allows people to get a much better financial deal than what’s on offer on the high-street. People are already seeing the benefits – for example, those lending at Zopa have since launch received about a 50% better rate of return on money they’ve lent out than if they’d left their money in the best savings accounts such as ING Direct or Egg.”
According to the survey, 64 per cent of people who use high street banks felt it was important that their banks provide a service that enables social interaction and community participation, yet only 13 per cent felt their bank significantly enabled either of these things. Additionally, 56 per cent said that the more social and interactive features of Social Lending would be a significant factor in their decision to use a Social Lending scheme and 18 per cent stated that investing in people rather than institutions would motivate them to use Social Lending marketplaces such as Zopa.
About the study
The study, ‘Internet Based Social Lending: Past, Present and Future’ by the Social Futures Observatory took place over a period of six months. It combined extensive desk research and empirical research consisting of qualitative interviews and two separate independent studies - one amongst Zopa members exploring their attitudes towards Zopa and more mainstream banking, the second survey amongst a general sample of mainstream banking customers.
In total, 1,000 people were surveyed and 20 qualitative interviews took place.
The study is divided into three broad sections. The first helps to trace the more traditional notions of Social Lending and defines the term. The second examines several broad socio/cultural themes underpinning the re-awakening interest and activity in Social Lending. The third is a case study of Zopa.
The complete 116-page study can be downloaded from http://www.socialfuturesobservatory.co.uk
About Social Futures Observatory
The Social Futures Observatory is an independent 'think tank' closely associated with the Institute for Advanced Studies at Lancaster University. At its heart lies a philosophy of collaborative, community-based research bringing together a wide range of researchers and practitioners to think about and explore the challenges facing society over the next 10 years and beyond.
Supported by multi-disciplinary groups of academics and commentators we work closely with individuals and organisations actively initiating change and operating within changing environments, to help provide clear accounts of what actions taken today may imply for longer term futures.
About Zopa
Zopa is the online marketplace where people meet to lend and borrow money. Lenders get great returns and borrowers get low-cost loans. With no bank in the middle, both parties get better rates.
Zopa makes money human again - lenders can see where their money's going and borrowers, where their money's come from.
Lenders are enjoying a smart way of getting a return, alongside their savings and investments. Some lenders are earning up to 14% pa, and the average return on all money lent to date is 6.75% pa (figures are before tax, but after bad debt and fee).
Borrowers are finding it a fair and human way of getting a low-cost loan. They are enjoying market-leading rates, with a typical APR of just 5.2% (based on £5,000 over 3 years in the A* market), and the flexibility to repay their loan early at no extra cost.
To protect lenders' money, Zopa uses all the safety measures banks use, plus a few more. All borrowers are identity-checked, credit scored and risk-assessed, and anybody lending £500 or more has their money spread across at least 50 borrowers.
Zopa was set up by many of the team that launched Egg, and is backed by the same investors that backed eBay, Betfair and Skype. Since launching in the UK in March 2005, over 105,000 people have joined.
Zopa was voted “Internet innovation of the Year” at the CNet Technology Awards in October 2006, and in the same month was named by Business 2.0 as 1 of 11 disruptive companies “whose breakthroughs will change everything.” In August 2006 Zopa was given 5 stars from What Investment Magazine, the first time they've given a perfect score in years.
Zopa Ltd is authorised and regulated by the Financial Services Authority as a general insurance intermediary, holds Consumer Credit Licences from the Office of Fair Trading, uses the same processes and fraud prevention systems as banks (including Equifax, Experian and Call Credit for credit rating), and is a member of the Finance and Leasing Association.
Zopa stands for Zone of Possible Agreement. It is the overlap between one person’s bottom line (the lowest they are prepared to get for something) and another person’s top line (the most they are prepared to give for something).
Zopa can be found at http://www.zopa.com
