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Hype? I’m not sure.

Firstly let me declare an interest – I am cofounder and CEO of Zopa. We were the very first online peer-to-peer lender anywhere in the world and just celebrated our fifth birthday.  We lent more money last year than over the previous 4 years combined.  Whilst £70 million will sound tiny to most banks, an escalating growth rate of now well over 100% year on year will not.  

I think the time it has taken for us to approach scale and profitability is a function of the time it takes to build trust in a new consumer finance offering, especially for a brand new start up like Zopa. Anyway, there is no question the time is right, as Matthew Parris eloquently sets out here in the Spectator http://www.spectator.co.uk/politics/all/5831713/its-time-we-bank-customers-started-talking-to-each-other-in-the-queue.thtml

I'm Zopa's CEO and am not sure if you are suggesting that Zopa is underregulated? If so, I would disagree and so, I think, would the UK regulator. If it's that banks are in danger of being overregulated, that's an interesting question, but I don't think one related to their ability (or inablility in fact) to innovate. That is more related to their sheer scale, inertia, legacy systems and particularly their "monoculture". Furthermore, the drastic loss of consumers' trust over the last two years makes it more difficult for them to sell new propositions to their customers. I often hear bank executives saying that all they need to do is rebuild their balance sheets (and lobby regulators about not making that task more difficult) while what they really need to do is restore trust.

Thanks for the mention. Not really sure what the poster you quote was talking about. Indeed there were 2 responses to him on the BBC, firstly:

102. At 12:34pm on 21 Oct 2009, armagediontimes wrote:

#93 equitableinterest. The question is not why should the general taxpayer subsidise Zopa lenders but why Zopa lenders should subsidise the general taxpayer - i.e. You. But you don´t get it do you?

If you think banks creqate wealth for people then Oh boy are you going to be surprised. Reality is heading your way, and it weighs 1500 tonnes.

and then:

103. At 12:49pm on 21 Oct 2009, Reaper_of_Souls wrote:

# 93. At 11:49am on 21 Oct 2009, equitableinterest wrote:

"@ zopagiles

Do your lenders have the same business risks as banks? e.g. do they employ thousands of people, over hundreds of branches, using local services, creasting wealth for people other than themselves?"

The banks we bailed out actually seemed to be doing less and less of that over the years.
..and even after those costs they made massive profits - although of course we got some of that back in the form of tax (although banks are pretty good at reducing the tax they pay) and through pension scheme shareholdings.

You seem keen to portray the banks as a social service, when they're a business, others may profit from their presence, but they provide services to the bank for that.
The excuse that what may be seen as a less efficient way of doing something is better because it pays more to others due to that inefficiency is akin to the argument for throwing more and more at the public sector and getting nothing more for it.
If at the end of the day there's no additional gain, surely resources could be put towards doing something more useful.

In many ways, the inflated interest margins exploit borrowers (other than those with loans tied to base rate) and especially savers to fund the cost base and create those nice profits [although most are from merchant banking] and go towards paying bonuses.