Giles writes on the Zopa blog in Opaque banking practices -

It’s old news that most people don’t believe banks operate in their customers’ best interests, and many believe their profits are excessive. But the public had always regarded the banks as safe. Now it turns out they may not be after all.

Worse still, the man on the street can’t actually assess how safe or otherwise they are. The way some of them operate is impenetrably complex, and seems almost deliberately so. People might have become used to hidden catches in the small print, but now they are faced with potentially much bigger problems, hidden away in the banks themselves.

Reassurances from the management of Northern Rock were disregarded as swiftly as you’d expect. Similar words from the Government seemed to fan the flames of nervousness and doubt rather than help. In no time huge queues formed outside Northern Rock branches as customers demanded their hard earned savings.

In order to rebuild trust, banks will have to become radically more open and transparent. And this means some of the more exotic and opaque practices – like those that caused Northern Rock’s crisis – may have to be consigned to the City’s bin. This may leave some banks struggling on the road back to reality.

Meanwhile, back at Zopa, the last few weeks have served to shed new light on the appeal of Social Lending. Since we launched we have been proud of the innovative way we have created for people to bypass banks and get a better deal directly from each other. And we have done this by lending responsibly, and not to the sub-prime market. This can be seen from our default levels of below 0.1% across all of our lending.

Let me pause here to repeat that last line. “This can be seen from our default levels of below 0.1% across all of our lending.”

Giles continues:

We have also long been proud of our transparency. From very simple, and low charges, through to letting our members see who they are lending to or borrowing from.

But the last few weeks have also highlighted another key attraction of Zopa’s operation – ‘tangibility’. It is easy to see exactly what is going on. People are borrowing and lending between each other, with Zopa making it much safer and easier to do. There’s no highly paid City Slicker buying and selling futures, derivatives, Bizarre Bonds or whatever to make Zopa happen.

I haven’t written much about Zopa in the past year. When they make it to the US market (soon from what I hear), I hope they continue to speak in this same straightforward way. They’ll gain market share.