Peer-to-peer lender Zopa has launched a pilot with international transport network (ITN) company Uber to offer loans to Uber’s drivers in the UK. Charles Wheeldon writes about the initial success of the April launch and how it might progress in the next few years
Uber was the first ITN to disrupt the licensed taxi industry worldwide with its business model, which is the development, marketing and operation of the Uber app, which allows consumers with smartphones to book journeys with Uber drivers who use their own cars.
The service has exploded in popularity and is currently available in 58 countries and 300 cities worldwide. Four cities – London, Paris, Madrid and Berlin – saw major disruption on the roads when the licensed taxi drivers staged a coordinated protest last May against the service which threatens their livelihoods. Berlin has since banned the app, though it is available in other German cities, and Spain has also prohibited the use of the app throughout the entire country.
Zopa’s link up with Uber began in April 2015 and is initially available to drivers in London only. Uber cabbies log onto their own customised Zopa website to apply for a loan. Zopa has access to Uber’s data on the activity of all its drivers, which details all the journeys they have made, which allows the loan provider to make an informed judgement on affordability, concluding in a decision of whether or not to underwrite the loan.
If the call is favourable, Zopa sends details to Jenca, a Toyota dealership, along with the funds. Uber drivers then visit Jenca with their confirmatory email and are offered a choice worthy of Henry Ford himself, of a hybrid Toyota Prius – though it can be any colour including black, and they are also given the usual choice of the full range of add-ons. The car is then delivered a couple of weeks later.Although Zopa’s peer-to-peer model is based on multiple small investors lending en mass, Zopa’s Uber loans are exclusively provided by an institutional lender in the new risk market, so they are being tested with institutional money with an appetite for risk that Zopa’s consumer lenders don’t have.
"The beauty of it from our point of view," says Zopa spokesman Mat Gazeley, "is that the loan is secured on an asset." And with Uber data as the cornerstone of underwriting Zopa is confident that they are also not putting the borrower under undue stress because they have assessed the loan as affordable.
Currently the loans are fixed for five years but Gazeley is keen to stress that early payment and overpayments are allowed, with no financial loss to the borrower.
The scheme is, of course, still in its infancy, so the number of loans is currently low. However Gazeley maintains those figures are growing "and we aim to be in the thousands in the next couple of years".
How the scheme develops, contends Gazeley, will largely depend on Uber’s strategy and how strongly it pushes finance as an option to its drivers. In addition, he says Zopa will be working with Uber and other dealerships with the aim of extending the range of vehicles available through the loans "over the course of time".
Furthermore he adds that performance of the loans will be monitored and if the scheme is as successful as expected Zopa intends to open them up to Zopa’s army of smaller retail investors.
Gazeley continued: "This innovative marketplace deal is one of the first of its kind in the UK to go live between a P2P lending company and the Uber platform. Zopa and Uber believe this partnership is a great example of how technologically disruptive businesses can work together to provide additional value to partner drivers. This finance option will provide Uber drivers with a simple, fast and great value loan to help finance a new vehicle.
Giles Andrews, CEO and co-founder of Zopa added: "Partnering with Uber is an excellent move for us as it marks Zopa’s entry into the secured auto lending industry, allowing us to provide secured loans to a growing market of self-employed customers. This unique commercial deal offers Uber drivers a low-cost loan to fund their vehicle at an affordable monthly cost.
"Zopa and Uber are two rapidly growing businesses and this deal is aimed at accelerating the growth of the two companies in the UK. As Zopa becomes a mainstream service for consumers, we look forward to helping hard-working people fulfil their goals of owning their vehicles and keeping more of their income in the process."