We speak with Jos Henson from Zlty Melon – the Slovakian P2P platform you may be a shareholder of (but don’t know it)

Žltý melón is a 'pure' P2P platform with big plans. We speak with Jos Henson

Let’s get this out of the way – what on earth is a  Žltý melón? That’s Slovakian for a cantaloupe or rockmelon. It’s also the name of one of the oldest European P2P platforms operating on Continental Europe. Žltý melón (pronounced Zh-l-tee melon) is based in Bratislava and has been operating since 2012. That makes it fairly ancient in the P2P space. Žltý melón is still small, but has been showing steady growth and is expected to break into profit soon, a good achievement for such as small platform.

One other interesting thing about Zlty melon is that it is partly owned by the EU, which means that there is a good chance that you are actually a (very small) shareholder in the business. 

As could be expected, it has taken Zlty melon a few years to develop and improve their lending scorecard. In the last two years, default rates have continued to fall, and the platform has built up a solid track record.

One of the things that we like about Zlty melon is that a wide range of interest rates are available (typically between 8 – 25%). Returns after defaults for the higher risk grades have been impressive over the last 2 years. For investors looking for a extra yield (over 10%), and are willing to take a little more risk, Žltý melón could be worth looking into. 

Zlty Melon also offers investors secured loans. Their ‘Cash-free’ housing loans help young homebuyers in Slovakia fund the deposit towards their homes. The loans come with 2nd charge security against the property. Rates are lower than for the unsecured products and they best suit investors looking to invest long term and would like to help young people onto the housing ladder at the same time.   

We think investors should always review and analyse as much data as possible before investing their funds. Žltý melón actually provides some of the best data surrounding default rates and net investor returns that we have seen in any platform. Partly that’s likely to be because they have been operating longer than most other platforms, but there is also clearly an open and transparent approach that is refreshing to see.

We also think the auction format for loans, and the large amount of information available, makes Žltý melón very attractive to the many investors out there who view P2P investing as a hobby, where finding a trading strategy and doing analysis can help to generate higher returns.

To visit Žltý melón click here. Note – Žltý melón are currently offering a 1% sign up bonus to Explore P2P readers, further details are provided below.

Interview with Jos Henson from Žltý melón

Jos, what is Žltý melón? 
Žltý melón is a ‘pure’ p2p lending platform established in Slovakia in 2012, which offers a range of secured and unsecured loan products and connects people that need to borrow money directly with people that want want to invest. Both get a better deal than with mainstream banks. What we mean by ‘pure’ is that we are committed to the original principles of P2P lending. There is total transparency and a business model that always gives people complete control and does not prioritise large institutional investors over ordinary consumers. Perhaps the best example of this is that we operate an auction based model of p2p lending. Investors can interact directly with borrowers and compete to fund loans in terms of the interest rate and amount they are willing to lend, which is fully transparent and ensures both sides get the best deal possible.

Tell us about your current investor base – how many investors do you have and where are they based?

While we are still a relatively small p2p platform, especially when compared to some of the big UK platforms that have a large amount of funding from institutional investors, we have strong and sustainable growth which is powered by a loyal community of highly active investors. Currently we accept investors from across the EU and have a total of 2,570 investors. 

Who are the key people in the management team and what are their backgrounds?

Žltý melón was co-founded by Roman Feranec and Robert Hovarth, who both have a long background in the Finance and Insurance sectors, one from the finance side and the other from the legal side. Hendrik Bremer joined the management team as part of the Series A investment round in 2015, which included funding from the EU as part of its Jeremie initiative for innovative startups. Hendrik ads over 20 years of experiences in Financial Services within Central and Eastern Europe as a banker and partner at PwC.
What type of people are you lending to? Why do people borrow from you rather than a bank?


Our typical borrower is a younger person with stable employment earning an average or above average salary, who has completed higher education (either university or higher vocational training) and has a good credit history. However, we have also launched a new short-term loan product, aimed at low- middle income customers that have stable employment but for a variety of reasons cannot easily access credit from mainstream banks and so are forced to rely on expensive and often exploitative non-standard lenders. This  can trap them in a cycle of debt and borrowing. In both cases, people borrow on Žltý melón because they can get better terms and conditions with their bank, and have control over their loan without fear of hidden terms and skyrocketing penalty charges.  

You’ve been operating since 2012. That makes you almost ancient in European P2P terms! What have you learned along the way?

We were the first P2P lending platform in Slovakia, yet obviously P2P lending had already been around in places like the UK and U.S. for quite a few years, so we were able to learn from the experiences of others before we even got started. However, we are always working to improve our platform, based on our own internal reviews of our business and the extensive feedback we get from our community, which has really helped guide our development over the years. I think the best example of this is in terms of our underwriting processes and risk
management, where we have introduced many improvements over the years that have helped us decrease our default rates year-on-year since 2013, at a time when the industry as a whole is actually experiencing increasing levels of defaults, even on the most well established platforms in the UK.
When do you expect the business to break into profit?
We are on track to reach profitability in 2018, despite still having only a very small share of the total consumer lending market in Slovakia, which means we can grow quickly and very successfully moving forward as we expand into new countries. A key priority for us when we started in 2012 was to learn from the experiences of other P2P lenders and make sure that we always focused on maintaining stable steady growth, balancing the increases of both investors and borrowers, while continuing to improve our business model and the efficiency of our operation. It is arguably much easier to pursue a ‘quick growth’ strategy, especially one that is backed by large volumes of funding from institutional investors, but as we are seeing now in the U.S. and the UK this has serious consequences in terms of increasing levels of defaults, decreasing returns for investors and the ‘crowding out’ of ordinary people by institutions, which in our view goes against the original principles of P2P lending.
You seem to provide a lot more information than normal to investors about each borrower, and even allow lenders to ask the borrower questions. Do investors ever ask any questions, and do a lot of analysis? Or do they mainly rely on your risk grades?
Part of being a ‘pure’ P2P lender is that we have a real ‘community’ of investors, who are active both in terms of making their investments and their other activity on our site, such as discussions on our Forum and direct interactions with other investors. While we do offer a sophisticated ‘auto-invest’ feature, that the majority of our investors use to help manage their day to day investment activity, we also see a significant amount of direct communication between investors and borrowers in our loan auctions where people can ask questions and seek more information about a borrower and their loan application. This direct interaction between
borrowers and the people that eventually fund their loan benefits not only ensures our platform is highly transparent and that investors know exactly where their money is going and what it will be used for, but it also helps borrowers to get the best rate possible for their loan. In quite a few cases we have even seen examples of ‘social lending’, where investors agree to fund a loan at a significantly reduced interest rate in order to help out a borrower that has a particularly difficult set of circumstances in their lives that mean they need help from society. In our mind this is one of the key advantages of P2P lending over traditional bank lending, as while these borrowers are in many cases actually ‘low-risk’ their circumstances mean they simply would be unable to get a loan from their bank due to the automated lending processes and inflexibility of those institutions.
What return after defaults and fees can investors expect currently?
Our statistics page contains substantial amounts of information about what our investors earn on our platform, both recently and during our entire 5 year history, which is the best indication for people that are considering using our platform of what they can expect to earn. We also publish the full methodology behind these calculations, as unfortunately at present there is no true ‘standard’ for how interest rates and defaults are calculated across P2P lending platforms. Obviously the returns an investor will earn depend on the level of risk they are willing to take on and the investment strategy they pursue, but the actual interest rate (after defaults, fees and legal collections) for our investors over the past 24 months is between 8 and 10% p.a.
Your default rates seem to have fallen a lot over the last two years. Is this due to a better scorecard and underwriting, or are there other factors at play?
The primary reason for our decreasing default rates is that we are committed to continuing to learn and improve our business, with our loan underwriting processes being one of the most important parts of this. We are always working to improve our loan underwriting processes, but in 2014 and 2016 we introduced major revisions to our systems that resulted in substantial decreases in our default rates. Another related part of our business that we have improved on and that we think is substantially different to that of other P2P
lenders is our collections process for loan defaults, which is handled entirely for our investors by our not-for-profit subsidiary, ZOPI.
Not only is the process of legal enforcement of debts owed to our investors handled entirely for them, without any upfront fees or charges, ZOPI has been incredibly efficient and effective. For example, we have recovered 60% of the principal owed to our investors on loans that have been in default for 3 years or more
Bondora had a very bad experience in Slovakia with very high default rates. What do you think the reason for that was, and why have you had better results?

Bondora is obviously a firm that was an early pioneer in the cross-border EU P2P lending market and did a lot to ‘pave the way’ for firms like Žltý melón and who we have learned from when developing our own business model. However, there are two key things I would mention. Firstly, our loan underwriting processes and target customer demographic are significantly different than Bondora’s, both in terms of the loans they made in Slovakia and also their overall loan portfolio, which is the biggest reason why our default rates are so much lower than theirs. Secondly, while we believe cross-border P2P lending in the EU is definitely the future and are confident about our ability to expand into other CEE countries, the reason we believe we will be successful is because we understand those markets and their similarities with the Slovak market where we have developed our business model and lending processes over the past 5 years. The example of Bondora in Slovakia really highlights the challenges P2P lending platforms face when entering a market outside of their own country. 

How easy is it for investors outside Slovakia to fund their Zlty Melon account and make withdrawals? How many of your investors are foreign?

We began accepting foreign investors in 2016 and still feel we haven’t really begun our ‘push’ to attract and market ourselves to foreign investors quite yet, because like everything we do, we have wanted to do it slowly and methodically to ensure we get it right and make the user experience as smooth and attractive to investors from every EU country as good as it is for people in Slovakia. Depositing funds on Žltý melón is much the same as for any other EU based platform. We accept SEPA bank transfers from any EU country, which are typically processed within 1 working day, or for investors in countries that don’t use the Euro we also recommend they consider making their deposits via Transferwise, which is often significantly cheaper from them in terms of the fees their bank might charge them and can be completed within as little as 20-30 minutes!
Due to our strategy of ‘slow and steady growth’ with regards to international investors, the levels at present are still quite low and a small % of our total investors, but we are positive about the geographic spread of these investors, which is truly EU wide and shows us that we are offering something attractive a wide potential base of investors. International expansion in terms of investors is our second primary focus for 2018, along with international expansion of our lending activities, and we feel that once we really start to push our marketing activities in other EU countries we will see the numbers of foreign investors rise rapidly.
You are still quite a small platform – how do you see the business developing going forward? Do you plan to expand outside Slovakia?
Part of the reason we are relatively small compared to other platforms is due to P2P lending being a relatively new model in Slovakia and also because of our desire to grow our business in an steady, sustainable way.  We are definitely ready for and incredibly excited about the next phase of our business that we are entering into now, which will see us expand across the Central and Eastern European market. We began accepting investors from across the EU in 2016 in preparation for this expansion and think we are particularly well positioned to grow rapidly in this market due to our unique knowledge of CEE customers and the lack of established competition or existing P2P platforms in many CEE countries.  The first country we will be expanding into during 2018 will be the Czech Republic, which is obviously very similar to Slovakia in terms of language, culture and market conditions, as well as being a country we previously have experience in as we were already active as a P2P lender there prior to new regulations that required us to temporarily pause our activities until we are granted new authorisation by the financial regulator there.

1% bonus offer for new investors

Zlty melon are offering our readers a special offer to open a new account. Investors will receive a 1% bonus on all funds invested within 180 days of opening an account. To qualify, visit Zlty melon using the special link (it is not available directly on their site).

Note: This bonus will not be added to any promotional offers that investors may earn. Zlty melon currently offers bonuses on its 2nd lien mortgage products of between 0.25% to 2% (called ‘Cashfree Hypo’ and ‘Cashfree Housing’). For full details please contact Zlty melon or refer to the terms and conditions listed on their site. 

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