RICHARD DUVALL, one of the founders of Egg, the internet bank, is starting a new business on the back of two observations. People don’t like banks. And Ebay, the online marketplace, is one of the biggest business successes of the past 10 years.

Duvall has put these ideas together to create Zopa, which tomorrow sets out to become the Ebay of banking. Zopa will offer an online exchange that allows would-be borrowers and would-be lenders to deal with one another on terms of their own choosing.

By cutting out traditional bank overheads — no branches, no managers and so on — Zopa hopes to be able to offer much better interest rates to both borrowers and savers.

Duvall said: “We think that lenders will, on average, get 30% better returns than by putting their money in the best deposit account in the country, and borrowers will get a 20% cheaper rate.”

Duvall’s pitch is that Zopa is part of a new-age phenomenon, whereby people want more control of their lives and money as they lose faith in institutions and big companies.

Duvall said many bank depositors were unhappy because “it feels like gambling. I give my money to someone (the bank) I don’t know, who gives it away to someone else I don’t know, and at the end of the year they send me a letter I don’t understand”.

Borrowers were similarly disillusioned, he said. “They say it feels like sitting outside the headmaster’s study. (The bank manager) does some process that I don’t understand and at the end of it he says yes or no.”

Zopa claims it will facilitate a more direct and personal relationship between lenders and borrowers. Theoretically, this will enable depositors to exercise more control over the purposes to which their funds are put. For example, a depositor could choose to lend only to people in his own town.

In practice, Zopa’s assault on the coldly impersonal world of banking will only go so far. To ensure that lenders are not overexposed to any single borrower, their money will be spread between at least 50. Their exposure to any one borrower will be capped at only £200.

On a £15,000 loan — the maximum initially available from Zopa — that means a depositor will be lending to at least 75 borrowers. This does not sound terribly personal.

Zopa will use other risk-control mechanisms. It is working with Equifax, which will give lenders a credit assessment of would-be borrowers.

That will restrict the market of lenders available to borrowers. Not all depositors will wish to lend to someone with a poor credit record, and a correspondingly higher risk of default. Of course, if the idea works, the market mechanism will ensure that each borrower will end up paying the interest rate that he or she “deserves”.

Zopa plans to start by offering one and two-year loans to the most creditworthy borrowers. Assuming that all goes well, Zopa plans to move swiftly to provide finance for higher-risk customers and offer much more flexibility over loan periods.

The company will make its money by charging a 1% upfront fee to all borrowers. Zopa will collect monthly interest payments and distribute them among its lenders. “As a borrower, you will make one payment a month, even though it goes to a large number of people,” said Duvall.

To provide initial funds, Zopa has already attracted about 200 founder lenders. These include high-profile entrepreneurs such as Charles Dunstone of Carphone Warehouse and Simon Woodroffe, the founder of Yo! Sushi.

Zopa itself has heavyweight backing from Benchmark Capital, the American investment firm that backed Ebay. Johan Brenner, general partner in Benchmark’s London office, said: “It has global potential, it has something new, and it’s clearly disruptive to banking, lending and depositing as we know it.”

He acknowledged building trust would be a critical challenge. “We have to build a community that will use this service, and provide the liquidity for lending and borrowing.”

Although Zopa is already considering entering the American market, Brenner said: “It’s extremely important that we make this work in Britain first.”

According to its business plan, Zopa will break even on 20,000 loans, a mere 0.2% of the British personal-loan market.

Duvall is realistic about Zopa’s leap into the unknown. “We don’t really know what’s going to happen,” he said.