[P2P Selection] Financial Authorities Begin Establishing 'Central Agency' for P2P Information Management

Completion of Review and Selection Procedures Next Month
Focused Management on Information and Investment Limits

[Asia Economy Reporter Kim Hyo-jin] Financial authorities have begun establishing an information control tower to intensively manage P2P finance in line with the enforcement of the "Online Investment-Linked Finance Business Act (Ontu Act)," which incorporates online investment-linked (P2P) finance into the regulatory framework.

P2P finance is a service that connects borrowers and investors online. It has been recognized as an alternative financial solution for those who find it difficult to use primary and secondary financial institutions, and as an innovative finance that broadens the base of the loan and investment market. However, it has been criticized for becoming chaotic due to some companies' Ponzi schemes, fraud, embezzlement, and rapid insolvency.

Illustration by Youngwoo Lee 20wo@

According to financial authorities on the 27th, the Financial Services Commission announced an application notice for the "Central Record Management Institution for P2P Finance" to systematically manage information related to P2P finance. The Central Record Management Institution will perform roles such as ▲ centralized management of P2P finance-related information ▲ management of investment limits linked to P2P finance ▲ provision of linked investment and linked loan information to P2P finance companies, among others.

Judging that management of P2P finance and P2P finance companies is urgent, the financial authorities plan to complete the written review, presentation review, and final selection process by next month. Applications are being accepted from today until the 9th of next month.

The financial authorities plan to focus particularly on managing the soundness of P2P finance companies, such as delinquency rates, through the Ontu Act and the Central Record Management Institution. According to the P2P finance statistics site Midrate, the average delinquency rate of 138 P2P finance companies reaches 16.37%. Among them, 21 companies have delinquency rates exceeding 15%.

The overall soundness situation has worsened to the extent that the delinquency rate of the industry leader, Terra Funding, has reached 19.62%. Eight companies, including Deo Joeun Fund and Loop Funding, have disclosed delinquency rates of 100%. This means they have effectively ceased operations such as loan receivables collection. The investment funds that eight companies have failed to return to investors amount to 89 billion KRW.

Industry Leader's Delinquency Rate Approaches 20%
Urgent Need for Soundness Supervision

The delinquency rate of Pop Funding, whose CEO was arrested and indicted on fraud charges, also reaches 97.28%. The company's cumulative loan amount is 498.5 billion KRW, with a loan balance of 128.5 billion KRW. Sun Funding (89.0%), Beyond Funding (85.3%), Sodit (77.79%), We Funding (58.86%), Fundid (55.2%), and Finstreet (55.18%) also have considerably high delinquency rates.

The Ontu Act, enforced today, stipulates that only companies registered with the Financial Services Commission can operate. Companies must register within one year. Otherwise, they will be converted to existing loan businesses and will not be able to attract unspecified multiple investors.

They must have at least 500 million KRW in equity capital, and disclosure of information and provision of information on investment products will also be mandatory. This applies to matters that significantly affect management conditions, such as financial accidents or delinquency rates exceeding 15%.

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