'Talkative' Naver Loans, What Will They Look Like? (Comprehensive)

Smart Store Sellers Targeted
Annual 4~10%, Up to 50 Million KRW
Unsecured Credit Loan Launch Planned

[Asia Economy Reporter Kim Min-young] Curiosity is growing about ‘Naver Loan (tentative name),’ which Naver Financial plans to launch at the end of this year. In particular, the financial sector is paying close attention to what kind of products Naver will introduce in collaboration with Mirae Asset Capital. Some analysts suggest that hints can be found in the loan product that Naver and Mirae Asset Capital launched through collaboration last year.

According to the financial sector on the 30th, Naver and Mirae Asset Capital launched a loan product called ‘Quick Escrow Loan’ in April last year. The cumulative loan amount over about five months reached 30 billion KRW.

Quick Escrow Loan targets sellers on Naver’s shopping platform, ‘Smart Store.’ Mirae Asset Capital purchases the sales receivables early to help with cash flow through an advance payment (loan) program. It is a type of accounts receivable secured loan.

Mirae Asset Capital advances up to 80% of the sales proceeds and, once the customer purchase is confirmed, deducts only the interest from the remaining balance and pays the seller. Purchase confirmation means the transaction is completed without returns after the product has been delivered. The maximum loan limit is 100 million KRW, and the interest rate is fixed at 5.475% per annum (0.015% per day). It is a ‘daily loan’ concept where interest is charged individually for the period of use per sales transaction. It takes about 3 to 4 days from loan execution to settlement.

Quick Escrow Loan and Naver Loan share the feature of being products for Smart Store sellers. Also, both products were jointly planned and launched by Naver (Naver Financial) and Mirae Asset Capital. However, while Quick Escrow Loan is secured by accounts receivable, Naver Loan is a pure unsecured credit loan. Naver Financial recently referred to this as an ‘SME (Small and Medium-sized Enterprise) loan’ at a briefing, which can be described as a ‘small and medium-sized merchant loan.’

Additionally, while Mirae Asset Capital conducted the loan screening for Quick Escrow Loan, Naver Financial, selected as Mirae Asset Capital’s designated agent, directly receives loan applications and conducts screening for Naver Loan. In fact, this is the first loan product that Naver has planned, designed, and launched itself.

A Naver Financial official stated, “The interest rate is expected to be set between 4% and 10% annually depending on the credit rating, and the maximum limit is expected to be around 50 million KRW.” The loan period is likely to be short, ranging from 6 months to within 1 year.

The financial sector is questioning whether Naver Loan will succeed. Products like Quick Escrow Loan are relatively safe because they are secured by accounts receivable. Other capital companies and savings banks also offer similar products. However, since credit loans require thorough evaluation of borrowers and preparation for defaults, Naver Financial’s screening and post-management capabilities are expected to be put to the test.

Naver Financial boasts its own alternative credit scoring system (ACSS) that utilizes machine learning algorithms, artificial intelligence (AI), and big data processing technologies. At the briefing, Choi In-hyuk, CEO of Naver Financial, said, “We will do our best to support SMEs so that they can focus on their business and grow without worrying about funds.”

Why does Naver want to lend money to Smart Store sellers? Because many people started businesses on Smart Store after the COVID-19 pandemic. According to Naver, the number of new sellers entering online entrepreneurship surged starting from the COVID-19 period. The average monthly number of newly created Smart Stores increased from about 15,000 in 2018 to 35,000 as of April this year, more than doubling in two years. In March, when COVID-19 was at its peak, 37,000 Smart Stores were created, a 34% increase compared to February.

The number of excellent sellers is also increasing. Over the past year (July 2019 to June 2020), the number of sellers achieving annual sales of over 100 million KRW exceeded 26,000.

Nevertheless, 67% of sellers are still in their 20s and 30s, and most of them lack financial history, making it difficult to obtain loans from traditional financial institutions such as banks. They inevitably face difficulties in financing during the stages of starting and growing their businesses.

This content was produced with the assistance of AI translation services.