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Zopa reveals saving just £4 a day per child during school years could help parents save £27,750; enough to cover current university fees
Research comes ahead of 2019 A Level exam season starting and thousands of young adults heading to graduation with over £45,000 worth of debt
The FeelGood Money company is highlighting how parents could help their children prepare for their financial futures
Our latest research has revealed that parents could consider saving just £4 a day per child, over the 13-year period children are in school, to have a lump sum that would help their children tackle mounting university fees.
The research revealing the calculations of £4 per child comes ahead of this year’s A Level exam season that will see thousands of 18-year olds head off to university in September and embark on three years of education that could cost £27,750.
With the average annual university course fee hitting £9,250 a year (£27,750 for three years) and three years’ worth of maintenance loans reaching between £14,500 – £18,700, most graduates will be leaving university with over £45,000 worth of debt. While most parents will want to help their children minimise debt as much as they can, helping out with such a sizeable sum is no easy task. The daunting levels of education costs have fuelled Zopa to suggest ways in which parents could help their off-spring financially ahead of the proud graduation day.
Zopa is recommending parents begin early with their savings: starting from year 1 of primary school. Counting the pennies this early on, maintaining the £4 per day per child, saving routine throughout their school education until the end of their A Levels, will ensure parents have sufficient funds ahead of university even starting.
While £4 a day each may seem small, it equates to £1,460 annually. Putting these savings into a higher interest investment product – such as a peer-to-peer (P2P) product like Zopa Plus with target returns of 5.2% – for a little over 13 years would amount to £27,750* to cover the costs of the education fees.
“Nobody likes being told to cut a cup of coffee out of their morning routine but it can make a huge difference that could allow you to help your child manage future debt,” said Andrew Lawson, Chief Product Officer at Zopa. “Thinking ahead and saving a small amount each day as soon as your child starts school is a great option to securing financial stability ahead of starting university, but we know this time scale isn’t possible for everyone. Putting aside just £4 a day each over a few years and investing it with Zopa Plus could help parents offer a greater degree of financial stability as their child embarks on further education.”
If you don’t have 13 years to save until your child graduates, there’s still time to make each saved pound count towards the total. There are of course other options such as Junior ISAs, but these have a lower annual investment cap (£4,368 vs. £20,000) and even the highest rate of return only reaches 3.5% annually. The table below shows the rate of return that you could achieve with a Zopa IFISA:
When you invest your money with Zopa, your capital is at risk.
*£1,460 saved annually x 5.2% target return each year = £27,554.37 after 13 years +
(£4 x 49 days = £196) = £27,750
A Zopa account cannot be opened as a joint account and must be in one person’s name. Full details about Zopa’s investment products can be found here.
Our latest research reveals that Brits are spending £83 billion on upgrading their home each year.
This equates to the average house-proud adult splurging £3,048 to spruce-up their “castle” with furnishings, flowers and renovations – turning their house into a home to enjoy.
Spending over £3,000 on home improvements is more than double what we spend yearly on gas and electricity bills (£1,170) and on going out for dinner (£1,602), proving that we continue to place a high value on the place we call home.
And it’s not just DIY – research suggests that of the overall amount spent on upgrading their house, the average Brit spends £2,116 a year on furniture and furnishings, carpets and other floor coverings.
Zopa, the FeelGoodMoneyTM Company, also looked into how much time we spend on improving our home, with the study suggesting it’s 108 hours (or 4.5 days) per year.
With more than three quarters of Brits (77 percent) confessing to feeling ashamed about the state of their homes when unexpected guests arrive, it’s no wonder that people spend eight hours on housework every week to keep their homes looking beautiful.
Clare Gambardella, Chief Customer Officer at Zopa, said: “Everyone has a personal relationship with money. As this research shows, lots of Brits choose to spend their money on upgrading their house so that they can be proud of the place they call home, whether that be through a lick of paint or a spring clean. Our aim is to help people feel good about their money, whether that’s through spending on their home or elsewhere”
Sheffield revealed as the most houseproud city in the UK
The study also revealed that Sheffield is the most houseproud city in the UK, with 88 percent of residents in the Northern city claiming that their homes almost always look their best.
94 percent of Sheffield dwellers describe themselves as houseproud compared to a national average of 85 percent. A close second was Oxford at 90 per cent and Leicester at 88 per cent.
The research also revealed that 96 percent of Sheffield residents believe it’s important to keep up appearances at home through housework and renovations, compared to a national average of 92 percent.
Randa Kort, Interior Designer and judge on the BBC’s Best House in Town added: “Your home is your sanctuary, so it is key that you are proud of the space but also that you look after it day-to-day. Home improvements can be costly, but there are some great tips by property experts on how to get the most from your money. To get the ultimate FeelGood factor, make sure to speak to quality tradespeople if the design project goes beyond the DIY stage, and look around to see what is on trend for 2019.”
At the bottom of the houseproud list was Norwich, where only 35 percent of residents said their house was always spick and span.
They were joined by residents of Edinburgh and Plymouth who were most likely to say keeping up appearances at home was never a priory (15 percent).
The research found that more than a third (36 percent) of Brits felt renovating your house means you will get a better price for it, with 46 percent believing a loft conversion adds the most money, closely followed by a kitchen extension (42 percent) and new windows (40 percent).
A fifth of those who have a scruffy home said it was because they have busy lives, 18 percent added that their children tend to mess it up and 17 percent believe they are just not naturally tidy people.
The study found that 33 percent of the nation admits to tidying up BEFORE their cleaners come, while 23 percent say they like to look after their home as it’s a long-term investment.
Almost half (44 percent) believe it is important to keep up with the Joneses in regards to renovations, while more than a third (36 percent) believe a tidy house equals a tidy mind.
More than a quarter (28 percent) of Brits admit that seeing a messy or unclean house would put them off buying it, with one in 25 percent saying they wouldn’t dream of putting a property on the market without it looking fantastic.
The study also revealed a list of signs that you are houseproud, with touching up scuff marks on the wall with paint (39 percent), placing scented candles around your home (36 percent) and doing a thorough spring clean every year (33 percent) all topping the list. We repaint our interiors on average every four years.
Also, on the list was ironing your bed sheets (32 percent), shampooing your carpets regularly (32 percent), and buying fresh flowers on a weekly basis (31 percent).
Zopa has been an award-winning peer-to-peer lender since 2005. After gaining its bank licence with restrictions in December 2018, Zopa will now offer a wider suite of simple, fair financial products – including a fixed term savings accounts, credit card and money management app – with the aim of making people feel good about their money.
Since 2005, Zopa has helped a 100,000 people make their dream home a reality through its award winning personal loans.
Top ten most houseproud UK cities
Signs you go the extra mile with your home:
You touch up all scuff marks on the wall with paint 39%
You place scented candles around your home 36%
You do a thorough spring clean every year 33%
You iron your bedsheets 32%
You shampooing your carpets monthly 32%
You buy fresh flowers weekly 31%
You bleach your kitchen every day 27%
You iron your towels 26%
You bin all clutter 25%
You keep up to date with all DIY projects 24%
You wash your wheelie bin weekly 22%
You vacuum your curtains 19%
You load the dishwasher as soon as you finish eating 19%
You repaint your house from top to bottom every year 17%
You have a special set of china just for guests 17%
You spritz perfume around your house 16%
You bake bread just so your house smells good 16%
You keep all your kids’ toys in their bedrooms 15%
You update your kitchen every few years 15%
Your books are in alphabetical order 13%
You pretend you don’t have cleaner 7%
You make sure your kids are out when guests arrive 5%
Britons are spending over £6 billion a year to buy a taste of a celebrity lifestyle
One in four UK adults spending habits are influenced by celebrities
A fifth buy items under the influence of celebs every other week
On average people spend £517 a year on starstruck buys
Our latest report reveals that Britons are spending over £6 billion* a year to buy a taste of a celebrity lifestyle.
Zopa’s research found that a quarter of British adults spending habits are influenced by celebrities, with nearly a fifth of people questioned admitting to buying an item that they have seen a star wearing or using, every other week.
Zopa’s survey of 2,000 people revealed that those who had been influenced by famous people collectively spent over half a million pounds on such purchases in the year. The average Brit spends £517 annually trying to emulate celebs lifestyles in some way, claims Zopa.
When it comes to individual items, the average annual spend on gadgets tops the list at £130, with clothes second £125 and then experiences £120, homeware £118, hairstyles £113, perfume and aftershave £99, beauty products £96, watches £94, makeup £89, shoes £87, bags and jewellery £83, and then sunglasses £72.
The differences between men and women is marginal (women 25% v men 22%). However, men are more likely to make more frequent purchases and spend more each time.
When it comes to age, 18-24 year olds are the most influenced by the famous with over half (57%) having made such purchases in the last year, along with a third of 25-34 year olds. The least influenced are the over 55s with only one in ten of this age group having bought under the influence of celebrity.
Perhaps not surprisingly it is Instagram that is named as the most influential media channel. This is borne out in a recent report predicting that the value of this market is set to more than double to 2.38 billion U.S. dollars in 2019**.
And when it comes to holding the most influencer over us for women it is Holly Willoughby and for men, David Beckham.
Clare Gambardella, Chief Customer Officer at Zopa said:
“Social media gives us more direct access to the style of our favourite celebrities than ever before and showcases brands and products that consumers may not have previously been aware of. Whilst most of us can’t match the bank balances of the rich and famous, treating ourselves to an aftershave, lip-gloss or watch worn by our favourite celebrities can give us that same feel good factor.”
* £516,668 x 13.25 million (53 million adults in the UK – 1 in 4 is 13.25) + 6,845,851,000
Head of System Architecture and Integration, Slavo Ingilizov, on his experience at Zopa and his career moves so far.
When I was younger, I wanted to be…
I think I had all typical boy dreams – airplane pilot, astronaut, a race car driver.
I got into tech because…
My dad was an electronics engineer and brought home our first PC when I was around seven.
This was Bulgaria shortly after the fall of communism, so we had these locally made computers which were compatible with IBM PC. Windows hadn’t come out yet, so this was all command-line green-on-black stuff. He showed me how to use it and play games on it. My favourite was a game called Digger. It blew my mind. That’s when I knew tech was the path for me. I’ve been dealing with tech in some shape or form ever since.
My route into
I graduated in computer science and worked as a software developer. My previous company grew from 70 people to 650 by the time I left. I loved working for a fast-growing business.
Zopa was another opportunity to solve customer problems with tech and I jumped on it. It has delivered on the promise.
I started out…
In 2014 as a developer in a team of seven
others (two of us joined the same day, so a 40% increase!), at that point
the whole company was around 40-50 people.
After leading the Platform team (the team which looks after zopa.com), I became the Investors Tribe Lead. It was an exciting time – we launched the revamped Investment products and our IFISA. It was especially exciting learning how to lead a team and drive the product forward.
I then moved into my current role to look after system architecture and integration. This is a lot broader as I now work daily with so many more teams. I also manage our bank build programme.
A few of the questions I’m trying to answer are: how do our systems integrate with each other? How do we test them? How can we reuse and share functionality that is common across all products? How do we scale our platform and where do we want to take it next?
In my spare
time I like to…
My go-to way of letting off steam is going to rock/metal gigs. London’s great for it. I often browse the vinyl shops trying to discover new music too.
I’m generally a geek and like all kinds of geeky stuff. Board games is another big one for me and I do that with friends out of work, but I’ve also played quite a bit with my friends at Zopa.
supported my career through…
Zopa has given me the opportunity to move through many different roles, even if I didn’t have the experience required from day one. I love that and I feel like I’ve learned a lot here. I’m exposed to situations in which I keep learning.
Building a bank is fun, but also complicated and challenging. Being part of that process has changed how I tackle problems and think about them.
What enables us to learn and grow is exposure to many different people with diverse ways of thinking, and having to respond when situations put you outside of your comfort zone.
The culture at
Though Zopa has changed a lot since I joined, there are two things which have always been at the core of our culture.
Our ability to change is something we’ve managed to preserve. We don’t shy away from difficult decisions, even if it means changing how we work. This is amazing and I feel that’s the reason I’ve stayed so long – I would be really bored and annoyed in a company which refuses to change.
The second trait I see is our focus on customers.
I’ve been in so many situations where we choose the fair thing to do. Keeping
that attitude is what makes a difference at the end of the day.
Zopa recently took a look at different money idioms and gestures – like asking for the bill by miming signing a cheque, or flipping heads or tails with a coin – and we thought some of them sound a bit old hat, so we’ve re-imagined what they might look like for the future.
As new technology changes the way we invest, spend and lend money; the terms and phrases we use surrounding money are transforming too. So, we’ve created a top 10 list of money idioms that could be labelled as outdated and gave them an update fit for the future.
Zopa’s Top 10 outdated idioms in need of a refresh
We also commissioned famous newspaper cartoonist ‘Jonesy’ (Steve Jones) to illustrate just how transformed our lives might be in the future. Jonesy parodied the top five phrases, depicting each humorously with his own unique and recognisable cartoon style.
A ‘penny for your thoughts’ will be replaced with a ‘Bitcoin for your thought transference’
Each future-looking idiom challenges the status quo. For example, the ‘signing for the bill’ gesture will be redundant soon. Instead, when people have finished their meal, people will be more likely to signal facial or iris recognition to the waiter. Jonesy gives his take and takes it one step further by illustrating a customer displaying his eyeball to request the bill.
Clare Gambardella, Zopa’s Chief Customer Officer, added: “We have changed the way that customers invest money and get loans and are now looking to improve other banking products. We see customer behaviour and expectations changing all around us but we all still use these outdated idioms in our everyday lives. We wanted to know what fresh phrases and sayings will come out of this period of innovation. Jonesy’s future predictions are a great mix of satire and thought-provoking accuracy.”
Jonesy, who created the fun, future-gazing cartoons, said: “You don’t think about it, but so much of our language is based on old sayings that just aren’t relevant any more. This really made me think about how our lives could change in the future.”
Check out all the other cartoons for yourself below
* 1 million dollars was first used in the early 1900s – taking on board
inflation, this would now be around 30 million dollars
With the tax year drawing to a close, there’s been a renewed interest in Innovative Finance ISAs (IFISAs).
IFISAs allow you to utilise your tax-free allowance while investing in a range of peer-to-peer (P2P) products as well as debentures and mini-bonds – more on mini-bonds in a moment. At Zopa, we provide IFISAs which invest in consumer loans (it’s a market we know really well, with more than 14 years of experience). There are other IFISA providers out there that invest in different areas, such as property or businesses.
It’s really important investors know exactly where their
money is being invested, what the operating model of the platform is, and how
they manage risks.
In this piece, we take a closer look at the different types
of investments that can be included in an IFISA.
What’s a P2P investment?
P2P involves investors extending loans to borrowers or businesses and making returns on the interest when repayments are made. P2P platforms use technology to connect people looking to invest money, with people looking to borrow.
Different platforms have slightly different models. Some will allow you to pick and choose who you invest in, and even
pick your price, this can be very risky, with all your money concentrated into
a small number of loans, and requires a really good understanding of the risk
to be able to set prices.
At Zopa, we only lend to low risk “prime” people, never
companies. It’s a big market, and there’s a lot of data, that helps us make
decisions on borrowing criteria, and how we expect loans to perform. We also
like prime consumer loans, because (whilst not immune) they tend to be a bit
more stable through economic upswings and downturns than some other investments.
In addition to all this, we manage our customers’ risk by ensuring that their money
is spread across many loans. This
diversification of investor money across a large number of different loans is
an excellent way to reduce the risk.
Mini-bonds can fall under the IFISA umbrella but
they are different to other P2P investments. That difference matters. Here’s
What’s a mini-bond?
Mini-bonds can sound similar to established P2P offerings, but they should not be confused. IFISAs that deal in mini-bonds often allocate the whole of an investment to one business. In these cases, the risk is concentrated in one company. If that goes bust, big losses can follow.
And that’s not all.
Breaking down the
First and foremost, most mini-bonds are not actually IFISA
eligible. Only a very small proportion of existing IFISAs will include mini-bonds.
There are big differences in the risk associated with each product. Mini-bonds tend to be viewed as riskier than P2P. One reason for this is that they normally involve investing in one company, so if that firm goes bust the whole investment could be jeopardised.
At Zopa, and some
other P2P platforms, no single borrower holds all of an investment. We break
our investors’ money down into small chunks and spread that across different
loans. Although one loan may default, an investor should have lots of other
healthy ones to cover this loss. We also factor predicted defaults in when
industry has an established regulatory and supervisory framework which
companies like Zopa must adhere to. We also have contingency plans that protect
our investors’ money should we run into trouble.
On the other
hand, mini-bonds are currently largely unregulated currently.
usually fixed, meaning investors are locked in for the full term and cannot
access their money early if they want or need to.
the case with most diversified P2P platforms. For example, at Zopa we have secondary
markets. This means that if an investor wants to access their money as a lump
sum, they can sell their loans with a 1% sell fee, as long as there are other
buyers in the market.
are a relatively new product. As with anything that’s less tried and tested,
there is more chance that unforeseen circumstances could arise.
Many P2P platforms, including Zopa, have a strong
track record of managing risk. We’ve delivered positive returns on our platform in each of our
14 years of lending, take a look here.
Zopa has always striven to build a culture of diversity and equality. However, this is the first time that you will have seen us publish our gender pay gap. The UK government requires all companies in the UK that employ over 250 employees to publish their gender pay gap report. As Zopa comprises two legal entitles – Zopa Bank and Zopa Ltd, this is the first time that one of the entities – Zopa Ltd. has employed over 250 people. While Zopa Ltd. is the only entity that is required to officially log its gender pay gap on the government website, in this blog we have combined our numbers in the UK across the two entities as we believe this better reflects Zopa as a whole.
What is gender pay gap reporting?
Each year, all companies
are required to report the following pay statistics taken on the 5th
April “snapshot date”:
The difference in mean and median pay between all male and female employees, irrespective of role or seniority; expressed as a percentage over male earnings
The difference in mean and median bonus paid to male and female employees in the 12-month period prior to the snapshot date
The proportion of men and women receiving bonuses
The proportion of men and women in each pay quartile when divided into four quartiles ordered from lowest to highest pay
What’s the difference between gender pay and equal pay?
Gender pay gap is not
the same as equal pay. The two are very different measures, gender pay gap is
the difference between the average earnings of men and women over a period of
time, irrespective of their role or seniority.
Equal pay compares the
pay of a man and a woman who hold the same roles within a company – it’s an
Despite its name, the gender pay gap is more a measure of gender balance at all pay levels rather than equal individual remuneration.
Our results as on 5th April 2018
Why do we have a gap at Zopa?
We have fewer women in our senior leadership and management roles, and a
disproportionately higher number of females in non-technical, administrative
and operational roles. In fact, 68% of our female population sit in the bottom two
pay quartiles compared to 40% of our male population. This is also the reason why our median pay gap
is significantly higher than our mean pay gap.
One reason for this is
that we have an award-winning customer services and operations team at Zopa.
Unlike many other financial institutions, we make a conscious decision to keep
our customer services operations in-house, under the same legal entity. This is
a key contributor to our customer centricity. However, this also contributes to
our pay gap because we have a higher percentage of women than men in this area
and operations roles generally command a lower market value than other roles in
the financial or tech industry.
Indeed – in FinTech (like many others in our industry), we have a heavy
reliance on technical roles that traditionally require a background in science,
technology engineering and mathematical subjects. These roles tend to attract higher salaries
and the talent pool is overwhelmingly male, due to the lack of women studying STEM
subjects at university, in fact in 2018 only 26% of core STEM graduates were
As a consequence, women occupy only 23% of the core STEM occupations in the UK today. And when it comes to technology roles, the numbers are even lower with 17% of Information and Communication Technology (ICT) jobs being done by females and only 19% of IT technicians being female. Currently at Zopa, women occupy 18% of our STEM roles.
Closing the gap
Our numbers are far from ideal and it is evident that we have a long way to go in order to improve the gender pay gap at Zopa. We also recognise that change will not happen overnight and it will take time for results to show. It has been reported that due to the broad socio-economic factors influencing the pay gap – it will take over 100 years to address it in the UK. However, we have already started to take action to improve our gap in the short term with a view to ultimately closing the gap in the long term.
Women in Finance
In September 2018, we signed up to the Women in Finance Charter and have committed to increase the percentage of women in senior management to 43% by 2021.
Recruitment and promotion
We are making progress on improving the diversity of our recruitment. 36% of all new joiners in 2018 were women compared to in 2017, where the number was 31%.
We have also significantly improved the gender diversity of our board, adding four female board members over the last 18 months. In addition, our senior management is now 37% female.
We check for and remove gender bias wording in our job adverts in order to appeal to a diverse candidate pool. We are aware that women can be put off applying for jobs which are described using traditionally masculine language. And we continue to train all of our staff to recognise and remove unconscious bias.
We openly offer flexible working and encourage both women and men to have a better work life balance. We believe it is important to set the tone from the top and so almost all of our senior management having some sort of a flexible working arrangement. This enables Zopians to have a better work life balance and allows both women and men to share the responsibilities of caregiving.
Reducing reliance on traditional education / career
At Zopa we understand that people may not have had the opportunity to study a particular subject or train in a particular area at University. By encouraging internal career mobility, we allow people to develop their careers in a variety of ways, for example we have trained customer service agents to become compliance officers, developers, lawyers and HR specialists. This not only makes Zopa a great place to work, but also starts to break down some of the systemic pipeline issues that we see in STEM professions.
In addition to continuing our progress in the
above areas, we are also making the following commitments:Recruitment
We will continue our efforts to be inclusive in our recruitment processes. We commit to presenting a pool of diverse candidate to our hiring managers and to ensuring that our interview panels are demographically representative. Additionally, we are making interview training mandatory for all our hiring managers and recruiters. Our aim is for Zopa to become an employer of choice for women in tech and finance.
We will regularly track our demographic data to ensure that we are improving our demographic split. By creating awareness, we will encourage our people managers to take ownership of creating gender balance on their teams and to think outside the box when looking for candidates to fill vacancies, with an aim to increase female representation in STEM roles and male representation in non-technical roles.
Partnering with external organisations
We have already started partnering with external organisations to position Zopa as an attractive employer for people from diverse backgrounds. In 2019, we look forward to furthering our efforts on this front by partnering with organisations that support this aim.
We believe that these actions will help us to continue building the culture of diversity and equality which is so important to us.
At Zopa we believe that diversity is key to a successful business which reflects and represents the customer base it serves. Therefore, it is critical that we play our part in closing the gender pay gap in the UK. Our focus, moving forward, is to continue to develop and evolve the practices that will enable us to attract and retain a more balanced workforce at all levels.
QA Engineer Milda on what she loves about tech and why she’d encourage other women to work in the industry.
I realised I wanted to work in tech when…
I had felt some pressure to go straight into university after school, and I attempted several courses in different fields, to see if any of them “fit”. I tried chemistry, physics and graphic design, but I felt like none of them were a good match. I like both creativity as well as logic, so I wanted to find a career where I could use both. I investigated programming and tech. It clicked! I felt like it was a perfect combination of both creative and critical thinking, and it went from there.
In my current role…
I’m a QA (Quality Assurance) Engineer. I’m responsible for the work quality on my team, which involves ensuring best practices are followed, as well as verifying our product works as expected.
I got into tech…
I signed up for a programming course with the Open University. After two years of full-time studies and work, I had the chance to move to London and get into a tech career, working as a test consultant.
Tech interests me…
Because it constantly changes. This means my work is different every day, and because it’s ever-changing, I’m learning continuously.
My first impression of Zopa…
Great! People around me were very motivated and hard working. The atmosphere in the company was buzzing– a lot was getting done – and it made me want to add value where I can immediately.
I’m inspired by…
I spent my twenties with a great deal of depression and anxiety. Getting out of it took time, was demanding and immensely worth it. I’m inspired by not wanting to feel like that again. Having a job that I love and people who support me is pushing me to do better daily, for which I am incredibly thankful.
The best thing about my role…
Is that I’m grateful to work with very smart and motivated people. It pushes me to hold myself to a higher standard and contribute to the overall success of the company, especially as a QA engineer. My work directly relates to the business being confident about what goes out to the customers.
People make or break a company, and Zopa has, by far, the best people I’ve had the pleasure of working with.
My most memorable moment at Zopa…
Obtaining a banking licence! It was a very joyous and momentous occasion, many people worked extremely hard for a very long time to get to this point, and I was lucky enough to be in the company when it finally happened.
The advice I’d give to other women looking to work in tech…
Is that it’s never too late. Technology is now ubiquitous in our lives, there are many ways you could approach a career in tech. Do not feel like you need to have started programming in your teens! Resources are plentiful and are easily accessible. Go for it!
Working in tech has been the most rewarding part of my professional life so far. I hope more women will think about it as a potential career path for them.
Milda Abromaviciute is a QA Engineer at Zopa. When she’s not putting products through their paces at Zopa, she can be found going to gigs, visiting galleries and playing video games.
There’s a problem in Britain’s banking market. Fintech businesses and the new ‘challenger banks’ hold many of the ideas, but the long-established major banks hold the power. Because of this, improvements in the way that we can access and manage our finances have been slower than many experts predicted.
The UK’s Open Banking initiative is designed to correct this. It’s the brainchild of the Competition and Markets Authority, which wants to make the sector more competitive. The idea is to pass power to innovative tech businesses to create a new wave of customer-centric banking services.
Open Banking launched in January 13 2018, when nine major banks in the UK were mandated to provide application programming interfaces (APIs) for current accounts to any third-party providers that request them. Using these APIs, third-party companies can retrieve a customer’s financial information directly from their bank (if given consent to do so). According to Didier Baclin, Zopa’s Head of Bank Build, “the initiative is about opening up competition in the banking sector, but it’s also about giving people better control over their financial data, and in turn over their money.”
Coming soon at Zopa
New services are emerging that help you to keep tabs on your spending habits by looking at your current account, and every few days, sets aside an amount of money that the service thinks you can spare and save. The hope is that services like these can positively change people’s experiences with their financial data, helping them to be more pro-active with their finances and feel better about money management.
For investors, there is also great potential. Imagine being able to aggregate and manage a diverse investment portfolio in one portal, with all the information at your fingertips. This could include real time updates on stock prices or financial news, allowing you to react quickly to events if necessary.
Zopa is already taking advantage of the new environment. Instead of our customers having to upload bank statements to manually verify their income as part of the loan application process, they can now save time by allowing us to access their transaction information straight from their bank. We’re keen to experiment with other Open Banking services too. We’ve built a feature allowing users to connect multiple different accounts in our mobile app, and are going to test it with a group of our loans customers in the next few weeks. We’re very excited to see what the response will be, and how users understand this new technology. Inside Zopa, we’re also testing different ideas and prototypes to see how we can use Open Banking to make debt management easier for our borrowers, and to improve the experience for investors.
Lift-off in 2019
Open Banking is still in the early stages, but 2019 should be a transformative year. In September it will be given a boost by the EU’s Second Payment Services Directive, usually known as PSD2. Although the UK will probably have left the EU by then, it will abide by these rules, which are very much in the spirit of the UK government’s own Open Banking initiative. Under PSD2, Open Banking will extend to every bank and cover credit cards, charge cards and some deposit accounts.
Some people in the industry are also talking about eventually extending Open Banking to include other financial information not covered by PSD2, such as pension details. The more information that can be put together, the more useful Open Banking will be.
Another important element of Open Banking will also come into play this year. Banks will have to allow third parties to initiate payments. This will make things more convenient and flexible for customers, who will be able to use just one app to make payments or transfers from multiple accounts.
Having an overview of your finances in one place – and the ability to make transactions will help consumers better manage their money. For example, if you find yourself overdrawn on one account, for example, at the touch of a button you will be able to send funds from another account and avoid a fee. To make it even easier, in 2019, there will also be a focus on helping customers to access Open Banking from their smartphones, using biometrics to verify their identity, such as scanning a unique identifier like a fingerprint.
“Of course there’s still work to be done, but we expect 2019 to be a significant year,” says Baclin, “upcoming initiatives such as app-to-app authentication and the ability to initiate payments will improve the connecting experience and further accelerate consumer adoption.”
Are security concerns unfounded?
One reason why many people haven’t embraced Open Banking so far is because of concerns about security. The public is becoming more conscious about the need for cyber security, which is positive. But the Competition and Markets Authority has put measures in place to protect users. Firstly, third-party providers will only be able to access your financial information if you give them permission. Secondly, Open Banking should be safe as long as you stick with firms regulated by the Financial Conduct Authority (FCA). If there’s a security problem with a third-party provider supervised by the FCA and you end up losing money, the bank has to reimburse you.
At Zopa, cybersecurity is something that is very close to our heart, given that customers trust us with very important personal and financial data. We invest heavily in this area and have our own information security team working hand in hand with our software developers to constantly improve our systems and practices as technology moves on. We also work with a range of third party firms to continuously test our infrastructure and applications and make sure they are resilient.
Making Open Banking as frictionless and user-friendly as possible is the key to making it a success. Although the banks haven’t yet perfected the design of their API systems, or the way they authenticate requests to access customer information, a lot of positive progress is being made. It will be exciting to see the innovation that emerges in 2019. There are already 80 third-party providers registered with the FCA, with another 100 being processed.
Although Open Banking has been a little slow in its first year, we think much more will happen this year. We like to think of it as a powerful jet plane: slow to get off the ground, but sooner or later it will be flying high. With Open Banking, the sky’s the limit.