Zopa Changes Matching Algorithm

Zopa has announced changes to the sequence in which investor funds are matched in lending.

Over the next few weeks we will be making a number of changes we believe that will improve the overall lending experience.

Phase 1 – Maximum exposure change

Starting this week, we will be adjusting the maximum exposure for lenders. This will mean that the maximum you lend to any individual borrower will rise from 0.5% to 2% of your total funds. This means that you will lend in £10 chunks when lending up to £1000, £20 chunks when lending above £1000, £40 chunks above £2000 etc. This change will enable us to allocate more of a lender’s money to each loan and allow funds to be lent out more quickly. From a risk point of view, 2% provides a good level of initial diversification and over the course of time it will steadily increase so that lenders will have hundreds or even thousands of individual loans.

Phase 2 – First in first out lending (FIFO)

The second update which will also take place in the coming weeks will see us prioritise repayment money to allow existing funds to be matched more efficiently. We are calling this “First In First Out” (FIFO) and will separate out new funds from repayment funds, with repayments being matched first. New funds, or manual top ups are then placed in a FIFO queue and then dropped into the matching engine in a controlled way. This prevents spikes in new funding from slowing down lending of repayment money and allows us to give an accurate prediction of when new funds will be matched. It also allows us to lend as much repayment money on offer before allocating new funds for loans, therefore working your existing money harder.

Phase 3 – End of day matching

In the following weeks we will begin matching loans in one process at the end of each day. By allowing loans to be accumulated over the course of the day and including rapid returns, we can optimise the matching process to make it even more efficient. This will mean that all our lenders will receive a more consistent blended rate, regardless of lending size in any given day.

At Zopa our goal is to provide the best rates to our lenders and borrowers and ensure that we are as efficient as we can be in our lending. We believe that lenders will see an immediate effect on their money being matched. Meaning increased efficiency and more consistent rates from the changes detailed above.

A discussion around this change can be found in this thread.

Zopa is also changing the layout of the site. One change is that the visibility of the link to the Zopa community features, especially the discussion forum is reduced.

Zopa reached 100,000 p2p loans made yesterday. These were funded by 52,000 investors. The main loan purposes are car loans, followed by home improvement and debt consolidation loans.

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