The "Bittou" Craze... Mobile and Internet Loans Reach All-Time High

Internet Loan Application Amount in Q3 Reaches 72 Trillion Won... 3.8 Times Increase Compared to Same Period Last Year

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Amid the 'debt investment (debt-financed investment)' craze, non-face-to-face loan applications via the internet and smartphones have reached an all-time high. The increase in loans taken out by ordinary people hoping for gains in the stock market could become a significant burden on our society depending on whether they repay the loans in the future.

According to the Bank of Korea on the 31st, the number of loan applications using internet banking in the third quarter was 2.424 million, 1.7 times higher than the previous quarter (1.422 million). The loan application amount surged to 71.9293 trillion won, 3.64 times the previous quarter (19.7481 trillion won). Compared to the same period last year, it increased 3.8 times.

Typically, loans taken out via the internet or smartphones are household loans, mostly general unsecured loans or deposit-secured loans. Notably, cases of young people in their 20s and 30s easily taking out loans via smartphones are increasing. In the third quarter of this year, the popularity of public offering subscriptions for companies like Big Hit Entertainment and Kakao Games drove this trend. A Bank of Korea official explained, "As people flocked to public offering subscriptions, there was a demand to quickly prepare the deposit, leading to a significant increase in non-face-to-face loan applications."

In the case of public offering subscriptions, there is a perception that one only needs to prepare the deposit, subscribe, use the funds for a few days, and then repay, so many do not visit bank counters but apply for loans easily through non-face-to-face channels.

The Bank of Korea also noted that the entry of Kakao Bank, K Bank, and others into the market has made non-face-to-face loans even easier. If mobile financial services like Toss start additional businesses, non-face-to-face loans could increase further for the time being. However, the government’s strong measures to curb credit loan growth to control housing prices and financial authorities’ regulations causing commercial banks to be reluctant to offer non-face-to-face loans may slow the growth rate.

Meanwhile, according to the Bank of Korea, last month’s general unsecured loan interest rates fell by 14 basis points (1bp = 0.01 percentage points) compared to the previous month, despite the largest-ever increase in credit loans. This was because non-face-to-face loans increased significantly among high-credit borrowers. Song Jae-chang, head of the Financial Statistics Team at the Bank of Korea’s Economic Statistics Bureau, said, "Last month, as financial authorities announced household loan management measures, non-face-to-face loans among high-credit borrowers temporarily increased. High-credit borrowers receive preferential interest rates from banks, so their rates are relatively low, and obtaining loans through non-face-to-face channels at even lower rates lowered the average credit loan interest rate."

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