Kakao Bank Forms TF to Expand Loans for Medium and Low Credit Customers... Aiming for Monthly Net Increase of 250 Billion KRW

TF Leader Appointed as 'Vice President'... CBO, CSO, CRO and Other Executives Participate
New Credit Evaluation System to be Applied This Month... Dedicated Products Launch in August

[Asia Economy Reporter Kiho Sung] By 2023, internet-only banks have decided to expand the proportion of credit loans for middle- and low-credit borrowers to over 40%, and KakaoBank announced that it will form a task force (TF) to achieve this. Additionally, the bank plans to more than double the loan volume compared to the previous year by the end of this year and increase net loans by 250 billion KRW monthly, signaling the start of full-scale competition in loans for middle- and low-credit borrowers.

On the 3rd, KakaoBank announced that it will prioritize company-wide resources to expand credit loan supply for middle- and low-credit customers and form a “TF for Expanding Loans to Middle- and Low-Credit Customers” to implement this.

The TF leader will be Kim Kwang-ok, Vice President in charge of KakaoBank’s management strategy. The team will include Lee Hyung-joo, Chief Business Officer (CBO), Ko Jung-hee, Chief Service Officer (CSO), Kim Seok, Chief Risk Officer (CRO), and heads of related departments.

Earlier, on the 27th of last month, the Financial Services Commission announced the “Internet-Only Banks’ Plan to Expand Loans for Middle- and Low-Credit Borrowers,” stating that internet banks such as KakaoBank, K-Bank, and Toss Bank will raise the proportion of credit loans for middle- and low-credit borrowers to over 30% by the end of 2023. Middle- and low-credit borrowers are defined as those with credit grades of 4 or lower, representing the bottom 50% of credit scores.

Internet-only banks were introduced to expand mid-interest rate loan supply but have been criticized for operating mainly focused on high-credit borrowers, contrary to their original purpose. As of the end of last year, the proportion of loans to middle- and low-credit borrowers in total credit loans was 24.2% for all domestic banks and only 12.1% for internet-only banks, about half the level. Therefore, KakaoBank announced plans to gradually increase the proportion of loans to middle- and low-credit borrowers from 10.2% at the end of 2020 to 30% by the end of 2023. To achieve this, the bank is implementing measures such as lowering interest rates on credit loan products for middle- and low-credit customers and expanding loan limits up to 70 million KRW this year.

Starting as early as next week, a new credit scoring system (CSS) will also be applied. The new CSS, which combines accumulated KakaoBank loan application customer data and telecommunications data since the launch of customer services in July 2017, is expected to more precisely assess the repayment ability of middle- and low-credit customers and help expand the range of eligible borrowers.

Moreover, KakaoBank plans to increase the amount of unsecured credit loans for middle- and low-credit customers from 1.438 trillion KRW at the end of 2020 to 3.1982 trillion KRW by the end of this year. The annual net increase target is 1.7602 trillion KRW. Considering the net increase over the past five months, the average monthly net loan increase from June to the end of this year is expected to be 250 billion KRW. Through this, the proportion of loans to middle- and low-credit customers is planned to rise to 20.8% by the end of 2021, 25% by the end of 2022, and 30% by the end of 2023. In August this year, a new credit loan product that meets the diverse needs of middle- and low-credit customers will be launched. The final system work is currently underway.

TF leader Kim Kwang-ok explained the background of forming the TF, saying, “To expand loans to middle- and low-credit customers, which is KakaoBank’s top management innovation task this year, it is necessary to further concentrate company-wide capabilities.” He added, “We will expedite the launch schedule of related products and services as much as possible and strengthen customer promotions and marketing to expand loan supply.”

Meanwhile, K-Bank plans to actively expand the proportion of middle- and low-credit borrowers starting in 2022, after capital increases are completed and the new CSS stabilizes, aiming to reach 32% by the end of 2023.

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