One of the oldest and largest peer-to-peer lenders, Zopa said it planned to launch a “next generation” bank where it intends to offer deposit accounts, revolving credit products and overdraft alternatives to borrowers.

It will continue to offer unsecured personal loans and, as is the case now, the peer-to-peer arm won’t be covered by the Financial Services Compensation Scheme (FSCS), but the new deposit account for savers will.

Zopa confirmed it is not planning to launch current accounts or open bank branches.

While it is early days yet as Zopa needs to apply for both a banking licence from the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), the application is expected to take up to two years.

Jaidev Janardana, CEO of Zopa, said he wants to launch a next generation bank to drive greater choice for borrowers, savers and investors, adding that it is well placed to do so: “The regulatory authorities in the UK have created an environment that encourages innovation, the adoption of new technologies and an increase in competition in the banking sector.

“Zopa has a history of creating innovative retail-facing financial services, driving consumer choice and transparency. We are responding to the positive regulatory environment and building on our experience to bring yet more choice to the market.”

Zopa launched in 2005 and so far it has lent more than £1.8bn. It had a record month in October, finally achieving profitability in September 2016.

See YourMoney.com’s Peer to peer lending: where should I start and what are the risks? for more information.