Internet-Only Banks Expand Credit Loan Share for Medium and Low Credit Borrowers... Targeting Over 30% in 2023

'Concurrent Advancement of Credit Evaluation System'
Strengthened Supervision on Expansion Plan Implementation
Credit Loans for Medium and Low Credit Borrowers Expanded to 4.6 Trillion Won

[Asia Economy Reporter Kwangho Lee] Financial authorities have set a goal to raise the proportion of credit loans to medium- and low-credit borrowers by internet-only banks such as Kakao, K Bank, and Toss Bank (currently under final approval review) to over 30% by 2023. They will also simultaneously advance the credit evaluation system (CSS) to strengthen the assessment capabilities of repayment ability for medium- and low-credit borrowers.

The Financial Services Commission announced on the 26th that it has prepared improvement measures containing these details to ensure that internet-only banks can contribute to inclusive finance based on digital innovation in accordance with the law and the purpose of introduction.

First, the financial authorities plan to gradually increase the proportion of credit loans to medium- and low-credit borrowers by Kakao Bank, K Bank, and Toss Bank to around 30% by 2023.

Accordingly, Kakao Bank plans to expand the proportion of medium- and low-credit borrowers, which was only 10.2% at the end of last year, to 25% in 2022 and 30% in 2023 starting this year.

K Bank also plans to actively expand the proportion of medium- and low-credit borrowers from 2022, when the capital increase is completed and the new credit evaluation system (to be introduced in July) stabilizes, aiming to increase it to 32% by 2023.

Toss Bank has set the proportion of medium- and low-credit borrowers at over 30% from its first year of operation and plans to expand it to 44% by 2023. However, since Toss Bank has not yet completed the final approval review, the proportion may vary depending on the approval status, the content of the approval, and the situation after the start of operations.

In addition, the financial authorities will simultaneously promote the advancement of the credit evaluation system to strengthen the assessment capabilities of repayment ability for medium- and low-credit borrowers. They will quickly build a credit evaluation system that reflects actual customer characteristics and continuously expand the scope of alternative information used in the credit evaluation system.

Kakao Bank plans to develop a new credit evaluation system with specialized models for medium-credit borrowers and those with insufficient financial history based on actual customer information and apply it by next month.

A financial authority official emphasized, "Internet-only banks will disclose their plans in advance and compare and publicly disclose the implementation status by each bank (quarterly). We will check the implementation status of each bank, disclose the results, and recommend improvements for any deficiencies."

Furthermore, the official said, "If the plan is not implemented, it will be considered in new business licensing and approvals. When reviewing new internet-only bank licenses, we will carefully examine the supply plan for loans to medium- and low-credit borrowers and the plan for building the credit evaluation system."

Meanwhile, internet-only banks plan to expand the outstanding credit loans to medium- and low-credit borrowers from 2 trillion won at the end of last year to 4.6 trillion won this year, increasing the supply by 2.6 trillion won.

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