Kakao Bank and K Bank Enter Corporate Loans... Expanding Their Lending Territory

Personal Business Loans from Shinbo Foundation Also Available at K-Bank and K-Bank
Business Scope Expected to Expand Amid Credit Loan Growth
Some Criticize "Internet Banks Should Fulfill Their Role"

[Asia Economy Reporters Kim Hyo-jin and Won Dara] Internet-only banks such as KakaoBank and K Bank are accelerating their expansion into the loan market. Their influence in the credit loan market is growing steadily, and competition in the mid-interest loan sector is heating up. Soon, they plan to enter the corporate (individual business owner) loan market, drawing attention to the potential impact on the overall loan market landscape. With the upcoming launch of Toss Bank, the competitive dynamics are expected to become even more complex.

According to banking and political sources on the 1st, KakaoBank and K Bank will begin offering non-face-to-face loans backed by guarantees from the Korea Credit Guarantee Fund for individual business owners starting in the second half of this year. These banks signed a 'Smart Guarantee' business agreement with the Ministry of SMEs and Startups and the Korea Credit Guarantee Fund in June last year. The Korea Credit Guarantee Fund is currently working on building the necessary IT systems to facilitate loan processing through these banks.

Based on explanations from bank and Korea Credit Guarantee Fund officials, it is anticipated that as early as July, KakaoBank and K Bank will be able to offer individual business owner loans guaranteed by regional credit guarantee foundations. Toss Bank, which is set to launch in the second half of the year, has also agreed to participate. A bank official stated, "If there are no special issues, loans should be available starting in July, or at the latest, during the third quarter."

With this development, the Korea Credit Guarantee Fund expects that financial support channels for small business owners and self-employed individuals will expand significantly into the non-face-to-face domain, greatly enhancing convenience. From the banks' perspective, handling guarantee-based corporate loans, which carry relatively lower default risk, will allow them to expand their business more stably.

Internet banks are also accelerating the expansion of mid-interest loans. KakaoBank recently lowered the limit on its high-credit employee credit loans by 50 million KRW to create room for expanding mid-credit loans. K Bank, which plans a capital increase of 400 billion KRW in the first half of this year, also intends to introduce mid-interest loan products.

In K Bank's case, after about two years of preparation, it has been working to expand its loan portfolio based on the apartment mortgage loans it launched in August last year. KakaoBank has also informed Rep. Park Yong-jin of the Democratic Party that it is preparing to launch a non-face-to-face mortgage loan using electronic registration. The exact launch date has not yet been finalized.

KakaoBank and K Bank’s Credit Loan Balance Reached 18.81 Trillion KRW at End of Last Year

Thanks to the spread of non-face-to-face transaction culture, KakaoBank and K Bank have rapidly grown their presence in the credit loan market. The combined credit loan balance of the two banks was 5.4718 trillion KRW at the end of their launch year in 2017, increasing to 9.5013 trillion KRW at the end of 2018, 13.8823 trillion KRW at the end of 2019, and 18.8165 trillion KRW at the end of last year. This represents nearly a fourfold increase in just three years.

Some voices have raised concerns that if internet-only banks focus on expanding operations centered on interest rate margins like traditional commercial banks, the original purpose of financial innovation could be undermined.

Rep. Park, who recently received reports from KakaoBank regarding plans for individual business owner loans and mortgage loans, criticized, "This is no different from simply copying the interest margin-driven business practices for which commercial banks are criticized," adding, "Rather than expanding business with an easy approach, they should faithfully fulfill their role as internet-only banks, which act as catalysts for innovation in the financial sector."

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