In a blog update, Zopa chief Jaidev Janardana says its banking arm will buy up the retail portfolio at full value, locking in interest earned so far by customers and ensuring the timely return of their money. Investors can expect to receive their investment balance back by the end of January.

Explaining the rationale behind the move, Janardana states: "Due to our prudent, data-led approach to lending, we have delivered positive returns to our investors for 16 consecutive years - including throughout two financial crises. Since launching our platform, the average return has been 5%. Even during the Coronavirus pandemic and the subsequent lockdowns we were still able to deliver an average return of 3.9%.

"However, over the last few years, customer trust in P2P investing has been damaged by a small number of  businesses whose approach led to material losses for retail investors.

"Linked to this, the changing regulation which followed raised the operational costs of running a P2P business, as well as the cost of attracting new investors to the Zopa platform. To offset these increased costs and ensure we have a sustainable and profitable business, we’d need to reduce investor returns to a point where they’d no longer be attractive and commensurate with the risk that investors take on."

Janardana says that since the launch of the banking business in June it has seen strong demand for its credit card and fixed term savings accounts. 

"This early success shows that we’re able to help more people through our fully regulated Bank, offering our customers a wider range of financial products."

The digital bank in October raised £220 million from a clutch of investors led by Softbank Vision Fund 2. The company has so far attracted £675m in deposits, issued 150,000 credit cards and is on course for near-term profitability and an IPO in late 2022.