Zopa Bank hunts for fintech acquisitions after £68m fundraise

Zopa Bank is on the hunt for acquisitions as the digital lender looks to step up its challenge to the likes of Revolut, Monzo and Starling ahead of a potential float on the London Stock Exchange.

The London-based fintech, which launched as a fully licenced bank in 2020, said on Friday it had raised €82m (£68m) in an equity funding round and was now eyeing deals to expand its product suite and enter new markets.

A person familiar with the fundraise said it valued Zopa at a premium to its last round of investment, which lent the firm a more than $1bn ‘unicorn’ price tag. The bank did not disclose its valuation.

The round was led by the investment arm of Danish conglomerate AP Moller, with participation from existing investors.

Jaidev Janardana, Zopa’s chief executive, told City AM the money would provide more regulatory capital as the bank expects to grow its balance sheet by 30 per cent to 35 per cent next year. It currently has £3bn in loans and more than £5bn in deposits on its books.

“We do feel that lots of fintechs have created some great solutions. And how can we join forces and accelerate the journey because you do not always have to make everything yourself,” Janardana said on his acquisition plans.

He added that Zopa would be “open and opportunistic” in searching for “the right fit”. The firm is unlikely to make deals in the consumer credit space, Janardana said, as it looks to enter new markets.

In April, Zopa booked its first annual profit of £15.8m for 2023 and expects that number to double in 2024. It struck a deal with John Lewis in October to provide personal loans of up to £35,000 directly to the retailer’s 23m customers.

With fresh firepower, Janardana is mulling a string of new business lines. The bank has been testing current account products among its more than 1.3m existing customers and plans to launch them in the open market in 2025.

Janardana, who hopes to grow Zopa’s customer base to five million by 2028, said the bank stood apart from its rivals in being “slick and easy to use as a neobank, but we do aim to deliver better value for our customers and also hope to make it easier for them to effectively manage their multi-bank financial life”.

He has put acquisitions at the heart of this strategy and is “looking at other fintechs” after fully integrating DivideBuy, a buy-now pay-later firm it purchased last year.

“It is more likely to be things that we don’t do as this point,” he continued. “It could be, for example, something that allows us to offer investment products or some other ways of wealth management because that’s something we don’t do.”

Janardana added that Zopa could also make an acquisition to enter the small and medium-sized business lending market, having “looked at a few [companies] but not found the right fit”.

Smaller UK fintechs are bracing for more consolidation as they grapple with higher interest rates and a tighter funding environment that values profitability over ‘growth at at all costs’.

On the larger end of the spectrum, Zopa has become a closely-watched IPO candidate and, along with other British neobanks, Treasury officials have courted the firm over a potential stock market listing.

Janardana reiterated his desire to take Zopa public on the London Stock Exchange but said he was waiting for the IPO market to improve as the capital heads for one of its worst years for new listings.

“There is no timeline, it’s not a top priority for us because we don’t know when the markets will open,” he said.

“We remain well supported by our existing investors. We still believe there is capital in the private markets for us to access. Our focus right now is really how do we grow the business, how do we offer more products.”

Janardana noted that “there is a lot of expectation” for a rebound in US fintech listings next year, with buy-now pay-later giant Klarna officially filing for an IPO last month. He said more US floats should translate into a “European market revival” in 2026.