Zopa, the world’s first peer-to-peer lender having launched as far back as 2005, is moving into banking after the fintech company confirmed it has secured a full banking license. It’s almost four years since Zopa publicly announced its ambition to expand into offering banking services.

At the time that declaration of intent surprised the alternative finance sector but in hindsight, with the p2p lending sector struggling at the onset of its first recession, Zopa’s move to diversify now looks astute. On announcing its banking license yesterday, Zopa confirmed that it intends to launch a bank offering services including savings accounts and a credit card.

There is a feeling that Zopa securing a banking license marks a new stage in the evolution of the p2p lending sector, which was seen as offering an alternative to traditional lenders. But just exactly what the development will mean longer term is more difficult to forecast.

Will Zopa somehow successfully combine peer-to-peer lending with more traditional bank lending? Or will the fintech slowly move away from its origins to become an online-only bank in the same style as the likes of Starling and Monzo?

Peer-to-peer lending sees usually private individuals finance loans issued to persons or SMEs. They usually pool their investments to finance an individual loan, and split their exposure between multiple borrowers to reduce their exposure if one defaults. They practically take on the role of a bank or other lender and benefit from an interest rate paid on top of the value of the loan.

While Zopa launched the sector as a whole in 2005, it was really from around 2009 onwards that the peer-2-peer lending industry took off. The international financial crisis and accompanying ‘credit crunch’ meant especially SMEs struggled to borrow from traditional lenders. At the same time, rock bottom interest rates left savers looking for alternatives to parking their cash in a savings account offering returns running behind inflation.

Zopa was quickly joined by a new generation of competitors but the industry as a whole also grew significantly, thanks to demand from both borrowers and saver-investors. Zopa’s p2p platform now approves around £1 billion of loans a year and has around 300,000 users, split between lenders and borrowers.

For the foreseeable future Zopa says it intends for the new Zopa Bank to ‘sit alongside’ the existing p2p lending platform. It remains to be seen how robust the sector will prove itself to be over the coming months and the expected economic struggles of many businesses that have been forced into cotton wool over the coronavirus lockdown period.