A few days ago James and I revisited two of the founders of Zopa James Alexander and Dave Nicholson. Zopa is the “eBay for money” who I first podcast about in April 2005. We’ve produced an edited version of our new conversation as another podcast.
We spoke to them in a noisy Italian cafe in London so you’ll hear a fair bit of background noise – but it’s a very interesting discussion. I’ve done some reasonably detailed notes below giving the gist of what we talked about.
For me, what stood out most was the comment some of Zopa’s customers used: the idea that Zopa is a way of lending/borrowing that is “more interesting than interest“. What the first year of operation is showing is the value many users place on the human connections and stories behind the financial transactions. This social value is one of the keys to success in open source marketing: it’s not just a story about better prices. It may remain a big challenge for Zopa to beat the banks but if it does so, this humanising is going to be very hard for traditional institutions to match. The social value is the reason many Zopa members are quite willing to put in the extra work needed to get to grips with an innovative way of lending and borrowing.
Download the Podcast – 18m 48s – MP3 (10.7MB)
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0 00 Introduction
0 26 What’s the business model for Zopa? Dave: Basically an online marketplace where people can borrow and lend, person-to-person. Because it’s not a bank, both borrowers and lenders get a better rate. We take a small fee for matching lenders and borrowers and we manage the entire process. It’s a very secure site, we take a lot of security precautions. We’ve over 50,000 registered members, millions of pounds transacted, and no bad debts. We’ve had missed payments but those are now back on track.
2 09 What are some of the lessons you’ve learnt in your first year? When we launched we got a lot of interest. One of the challenges has been turning that interest into transactions. We’ve been working on our process to convert that interest into transactions. There’s been a translation of Zopa from a good idea, to a great idea that people act on.
3.35 James A: My biggest personal learning, probably common to all startup: there are some things that take time. We got a lot of Nos from partners that after six months turned into Yeses, though nothing fundamentally changed.
4 09 Dave: For me it’s been how great our members are, how much the endorse/advocate us, how helpful they are, with lots of suggestions and advice.
4 40 Dave: Messaging has been important, so borrowers can leave a message for those who are lending to them. Some lenders love to get messages from borrowers, why they’re borrowing and how they’re using the money. Understanding the people behind the user name has been really interesting, a real talking point for our members.
5 47 Johnnie asks about the role of telephone sales people. Dave: Value of the role of talking to people on the phone, it’s been reassuring to members, they’ve made a real difference. Hearing a voice on the end of the phone has made a difference to people.
6 55 James A: Having the telephone staff in the same room as the rest of the Zopa team has been deliberate.. reducing the barrier between us and our members.
7 15 Dave: Ever since launch, we’ve had a word-of-mouth recruitment channel.. We also do a lot of the online marketing you’d expect any business to do. James A: Having the best borrowing product in the country means you get a lot of traffic… high on the best buy tables…
8 16 Dave refers to Seth Godin’s notion of flipping the funnel, using a blog, getting members to use tools like del.icio.us tagging to help Zopa succeed. It’s very non-traditional marketing.
9 00 James C: Do you have more lenders of more borrowers? James A: We have slightly more borrowers Dave: It’s surprisingly balanced, we expected a lot more borrowers than lenders.
10 40 James A thinks it’s fantastic that Prosper have launched… supports the idea that the model will work… it’s good news we’ve got a competitor, we’ll learn a lot from them
11 09 Dave talks about Prosper’s group functionality, getting borrowers to form groups. Further discussion of the possible benefits of this for social trust. Pushes some of the recruitment work out to members, might be a viral way to build business, might also be a slow way to build busines… worth watching.
12.34 Zopa plans to open in the US in Q2.
12 45 James C asks what a Zopa customer looks like. There are some common elements – early adopters, a very high level of interest in online activities such as blogging, financially pretty savvy, but in many ways very diverse… not a stereotype.
14 40 James A: Customers challenge us to continue to simplify, to drive on simplicity to make it easier to use Zopa. Members to date have been extremely tolerant of having to do a lot of work themselves. Some members like the detail but others want a much easier, hands-off approach.
15 48 James C asks about the social element. James A quotes customers saying “it’s more interesting than interest… interest is really boring” So the element of involvement is part of the attraction, not just the higher rates. Seeing what people are using their loans for. There are some really human stories in there. Story of a lady who recently got divorced, thanking Zopa members for allowing her to buy a caravan so she can continue to take her children on holiday.
17 45 Dave explains they’re going to look at increasing the ways for members to say more about themselves, share photos etc. “People love the idea of expressing themselves online.”
18 10 Drawing it a close, a question about ideas for expanding into other markets. Lots of enthusiasm for this but also a desire to focus on improving the Zopa product.