Zopa closes in US – does social lending have a future?

Just last week I wrote about Zopa, the social lending bank. Well it turns out, its US branch is shutting it’s doors.

Does this mean social lending – where people borrow money from others who are prepared to lend it – is failing? Turns out no.

The Zopa blog has this to say:

“You probably know that Zopa’s US operation has a very different model to that in the UK and Italy in that it works in partnership with financial institutions (the credit unions) rather than being a pure peer to peer marketplace as it is here and in Italy.
So while our model is doing very well in current market conditions, the US has been adversely affected in a way that just couldn’t have been predicted when we launched int he US and is no way the fault of our partners. For us, a real shame is that we weren’t able to launch the original model over there for regulatory reasons.

So, sadly, our US colleagues have decided to withdraw from the US marketplace. This decision will have no impact on Zopa’s other activities in the UK, Italy and Asia.”

It’s rather ironic that the US is in such dire trouble now because of a reckless lack of proper financial regulation. But that at the same time Zopa is not allowed to operate as a social person to person lender, due to US regulations. Odd that.

Zopa is doing very well in the UK.

Zopa’s UK operation has experienced significant volume increases in 2008 with huge growth in new members and increasing lender returns, while continuing to maintain excellent credit quality – currently less than 0.5% of loans are affected by any kind of late payment issue, with actual losses below 0.04%.
Zopa Italy has also achieved the highest growth of any European peer-to-peer operation since its launch in January, and has recently launched the first secondary market for any peer-to-peer operation.