In: Business and Management

Submitted By ok999
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Zopa is a UK-based peer-to-peer (P2P) online brokerage that links British residents who want to lend with those who would like to borrow. The idea was formed because of the increasing amount of 'freeformers', who are defined as project-based, self employed or freelance workers who weren't in full-time employment [Kupp et al. 2007], and had fluctuating incomes. Zopa describe peer-to-peer lending as a "smarter, fairer and more human way of doing money" which contrasts to the traditional banking model [Zopa Website]. In this essay I plan to discuss the uniqueness of Zopa and their business model in relation to existing financial institutions. Following this I will analyse Zopa's competitive advantage and then discuss Zopa's main competitors and how they could create barriers to entry for late entrants.

1) Begin your essay by discussing how Zopa is different from existing financial institutions.

Table 1 Due to the combined impact of the financial crisis causing access to credit to tighten, the increasing multi financial service products available, and the competitive rates, Zopa's members count has been able to grow to 140,000 in 2007. Table 1 can help provide a better understanding of how Zopa is operationally different to other financial institutions. Firstly, Zopa, unlike their rival larger financial institutions, only carries one product through personal loans. In contrast is RBS's seventy different services across a range of deposit accounts with over 14 million personal customers [Kupp et al. 2006]. In Chart 1 below we can see how the product portfolio of the Traditional High Street Banks are a lot larger than of Zopas. Having said this, Zopa has been able to provide outstanding lending and borrowing rates; their lending returns are 6.75% AER compared to Halifax's 4.75% AER (Exhibit I). The diversity of products of their rivals allow them to make many…...

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