Žltý melón is a well-established Peer-to-Peer lending platform for private debt in Slovakia with over 10 years of operation. The platform offers personal debt investments from borrowers in Slovakia for European retail investors. In this interview, you will learn from the Founder & CEO Roman Feranec what it means to invest with Žltý melón.
First, could you tell the readers a bit about your own background? How did you become interested in working with finance?
My whole background is in finance. I studied Economy at University with a specialization in Banking and Finance where I got my PhD degree. After the studies I worked for a global consulting company providing strategic consulting to banks in Slovakia, Czech republic and Italy. Later I also worked for a leading local residential real-estate developer as their CFO and COO. So, the founding of Žltý melón as a traditional peer-to-peer lender was quite natural.
How do you find and assess the investments Žltý melón makes available to retail investors?
There are several acquisition channels we use. First is the standard advertisement and promotion, mainly online. This channel is focused on acquiring primary standard personal loans. The second channel is partner networks. We cooperate with leading Slovak networks of financial brokers with hundreds of individual advisors. We use this channel mainly for the acquisition of our mortgage top-up loans. The third key channel is real-estate developers, as we offer a loan product for people buying a new flat or house, in cooperation with them. Last but now least we are very pleased that 20-30% of our borrowers come back to us again when they are looking for a new loan.
All applications are assessed and must pass our strict risk and verification process. Every applicant is checked and verified in external and internal databases. As a part of the verification process, we also check their bank transactions using bank integration through the PSD2 framework. Personal identities are verified by notaries or a combination of penny payments and online personal verification. Sure, as risk management is the key factor of success for us, there are a lot of other checks such as credit capacity calculation, employment verification, fraud detection, KOs and others.
Why should the readers choose to invest at Žltý melón?
There are a lot of peer-to-peer platforms in Europe where investors can choose to invest. So, my simple answer would be that investors who are looking for decent returns with a substantial level of security and investment protection can diversify their investments and also invest in Žltý melón. We successfully operate on the market since 2012 with a significant track record. Since then, our portfolio has been earning investors on average more than 7 % net returns per annum. As we provide secured as well as unsecured investment products, and investors have full control over their investment strategy, their investment returns can be even higher. We have a number of investors earning 15% - 20% p.a. We are very transparent, and all this can be seen on our statistics page on our website.
What sets Žltý melón apart from other personal debt Peer-to-Peer lending platforms?
There are a few key elements which I believe differentiate us from the most of other European platforms. We are still and we want to stay a pure peer-to-peer lender. A lot of platforms started the same but over time they moved away from this strategy to more bank-lookalike models and products.
With Žltý melón investors have full control over their investment strategy and investments. They can choose one of the predefined investment portfolios, but they can also create their own portfolio for automatic investments. Investors can also still choose to invest manually and pick up individual loans to invest in. We even allow users to communicate between each other so investors can even ask applicants some additional questions.
Investors also keep the full interest return from their loans to themselves, we charge just a small fee and only from investments which are properly paid.
Unlike other platforms which are usually focused on only one single loan type, we have more products and loan types on our platform and thus we can offer better investment diversification. With Žltý melón investors can choose to invest in standard personal loans, secured real estate loans or existing loans from external professional loan providers.
How do you decide when a loan is defaulted or with minimal chance of recovery?
This is not our decision and there is a formal process for that. At first, if there is an overdue loan repayment, we start a soft collection process. It is a combination of reminders and communication with borrowers. If the borrower is employed, we also apply for a salary deduction which is one of our investment security tools. In the soft collection, we also cooperate with a professional collection agency which supports us in this process.
If there is no progress and the overdue is more the 3 months, we formally claim this loan as defaulted and we start a legal collection process which can lead to the execution of the property of the borrower. Certainly, if there is collateral, we also start to enforce the receivable from it.
As can be seen from our statistics page, our historical average recovery of defaulted net principal is more than 60%. Naturally, some loans cannot be successfully recovered and there is a legal process when the executor or the court declares that.
How is Žltý melón regulated?
In the Slovak legal environment, peer-to-peer loans do not have the same regulation as banks and do not require a license from the regulator (National bank of Slovakia).
However, Žltý melón is regulated by several regulations of the European Union and generally binding legal regulations of the Slovak Republic. The most important legislation that regulates our activity are: Consumer Protection Act (Act No. 250/2007 Coll. as amended), Civil Code (Act No. 40/1963 Coll. as amended), Commercial Code (Act No. 513 /1991 Coll. as amended), Personal Data Protection Act (Act No. 18/2018 Coll. as amended), Act on Protection against Legalization of Proceeds from Criminal Activities and Protection from Terrorist Financing (Act No. 297/2008 Coll.) and the Electronic Commerce Act (Act No. 22/2004 Coll. as amended).
What do you think the future of personal debt Peer-to-Peer lending looks like? Which challenges do you see for the industry in the coming years?
Over the years peer-to-peer loans got matured and on most markets, they became a standard financial category and an asset class for investors. Banks have their standard place, but peer-to-peer loans found their market niche. On the lending side, they can very effectively serve there where banks due to their size or business model cannot. Benefits for investors are even more visible, as peer-to-peer lending platforms opened access to invest in loans, which is a very stable and profitable asset class, also for retail investors, which hasn’t been the case in the past.
More even, as the peer-to-peer lending model has lower margins and the core lies on its efficiency and customer satisfaction, platforms like ours are pushing on traditional loan providers to enhance their services, process, and products. From our experience, this positive effect on customers is also seen and appreciated by regulators.
What I expect for the future is that the peer-to-peer lending industry continue to gain its market share and potentially with continued maturity some consolidation will be also happening. We will also see if there would be introduced a joint cross-European legal framework for consumer peer-to-peer lending or it will stay on a country level as it is for now.
What’s next for Žltý melón? Where do you see your platform in five years?
We keep enhancing our services, delivering new functionalities and new products to our customers and we will keep doing so. Žltý melón already offers a spectrum of lending and investment products and we want to continue this strategy also for the future. We want to be a financial platform which can serve people with very diverse needs or different investment strategies and goals.
I believe we will be able to keep our significant growth and in five years we will be an even stronger player in the Slovak financial market. Let us see what the future brings, maybe we will also start looking for opportunities to replicate our success in other markets in the region.