Zopa has raised €80m as the UK digital bank makes an ambitious push into new product verticals such as current accounts, investments and a GenAI-powered financial assistant. It’s also looking to use the capital to fund acquisitions that could push the neobank into new customer segments and products.
The funding round was led by A.P. Moller Holding, a Danish investment firm with holdings in shipping company Maersk and Nordic financial institution Danske Bank. Existing investors, including IAG Silverstripe, Augmentum and Davidson Kempner Capital Management, also participated.
Zopa has raised more than $867m according to Dealroom, and scored a unicorn valuation at its last primary funding round in February 2023. CEO Jaidev Janardana declined to comment on Zopa’s new valuation in an interview with Sifted yesterday.
The lender-turned-neobank
Founded in 2005 as a peer-to-peer lender, Zopa began to develop banking services in 2016 as it sought more stable means to fund its loanbook. In 2020, the fintech became a regulated bank and launched savings accounts and credit cards.
The pivot appears to have paid off. The challenger bank reported a pre-tax profit of £15.8m in the summer, joining the select circle of fintechs that have posted annual results in the black this year.
The results, however, exposed how much of its DNA as a lender still remains. It made £213m in net interest income — a metric to determine a bank’s income from lending activities — 94.25% of total revenue (£226m) in the 12 months to the end of December last year.
New revenue streams
Part of the newly-raised capital will go into diversifying its revenue streams. In particular, it’s betting on converting its 1.3m customers into users of its current account service. Currently limited to around 10k users on a trial basis, Janardana says that this will be rolled out to all users at the end of H1 next year.
Still, it’ll have to be competitive to muscle in on its neobanking competition in the UK, which is dominated by established players like Revolut, Monzo and Starling. To do so, Zopa is currently trialling an interest-incurring current account product and is looking at implementing subscriptions as well as an investment product.
The UK digital bank is also open to acquiring other fintechs to add to its plethora of products, Janardana says.
“As we think about growing and consolidating and actually replacing the incumbents, we do feel that combining forces with other like-minded fintechs is a good idea,” he says. Zopa previously acquired embedded finance fintech DivideBuy in 2023.
One of its more ambitious goals to draw in customers is to create an AI-powered “personal financial assistant” for its users, which would provide recommendations for securing loans on favourable terms, or suggest a user should deposit leftover money in an interest-incurring savings account. Fellow neobanks such as Revolut, Bunq and Lunar have also announced similar AI-powered assistants in the last six months.
Still, Janardana doesn’t imagine a future where Zopa will drastically reduce its reliance on lending. He hopes to have 20% of revenue come from non-lending products in future annual results.
The road to IPO
According to industry watchers, Zopa is considered one of the top fintech candidates for a public listing.
Janardana says that none of the investors on its cap table, including the lead investor in this round, are in a rush to liquidate and return capital to their backers.
Zopa is also in no rush to go public, he says but when it does so, it’ll likely be on a UK stock exchange.
“Of course, closer to the moment you have to think about all options, but I would think the natural thing would be to [IPO] in the UK.”
Read the orginal article: https://sifted.eu/articles/zopa-funding-news/
