Peer-to-Peer (P2P) lender Zopa is set to branch out into digital banking after it secured a full UK banking licence.

The company, which launched its P2P business in 2005, will launch a fixed term saving account, followed by an innovative credit card later in the year.

The banking services will sit alongside Zopa’s existing personal loan and auto loan products.

The Zopa Fixed Term Savings Account will be digital-first and can be opened in a little as seven minutes. Savings will be protected by the Financial Services Compensation Scheme (FSCS) up to £85,000.

Zopa has raised £140 million, its largest funding round to date, enabling its banking entity to fulfil its regulatory capital requirements.

The investment has been provided by IAG Silverstripe Partners, the investment arm of IAG Capital.

An Opinium survey of 2,003 UK adults commissioned by Zopa suggested that the shift to digital financial services during the Coronavirus lockdown has increased the focus on customer service, with a fifth of UK adults saying they had faced struggles contacting their bank during the pandemic and almost a third stating they wanted additional flexibility and better guidance from their main bank to help them through the financial uncertainty.

Zopa said that COVID-19 had driven rapid changes in digital offerings for its 300,000 existing customers, with online assistance including dedicated help forms, an income and expenditure tool and a specific COVID-chatbot.

Zopa chief executive Jaidev Janardana, said: “Now more than ever the banking industry needs innovative, agile providers who work on behalf of customers - at a time when people want great value, fair financial services products and simple, intuitive digital experience, Zopa offers consumers a compelling and credible alternative they can trust.

“Securing our banking licence enables Zopa to play a wider role in the financial lives of our customers, as well as offering much needed choice and competition to the wider market.”

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