Internet Banks Ignite Mid- to Low-Credit Borrowers' Mid-Interest Rate Loans

KakaoBank Launches Kim Kwang-ok-led TF... Preparing New Credit Evaluation Model
K Bank Raises 1.25 Trillion KRW in Capital Increase... Toss Bank to Launch in Second Half

[Asia Economy Reporter Kiho Sung] Internet-only banks are gearing up for intense competition in mid- to low-credit borrowers' mid-interest rate loans in the second half of the year. While KakaoBank has launched a related task force (TF), K Bank is also preparing an advanced credit scoring system (CSS) and strengthening its stance by increasing capital through a paid-in capital increase. Toss Bank, set to launch in the second half, has announced a target loan ratio for mid- to low-credit borrowers of 34.9% in its first year, signaling a serious showdown.

The first to take the offensive is KakaoBank. On the 3rd, KakaoBank allocated company-wide resources to expand credit loans for mid- to low-credit customers and formed the “Mid- to Low-Credit Customer Loan Expansion TF” to execute this plan. The TF is led by Kim Kwang-ok, KakaoBank’s Deputy CEO overseeing management strategy, with participation from 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’ Mid- to Low-Credit Borrowers Loan Expansion Plan,” stating that internet banks such as KakaoBank, K Bank, and Toss Bank will raise the proportion of credit loans to mid- to low-credit borrowers to over 30% by the end of 2023. Mid- to low-credit borrowers are defined as those with credit grades of 4 or below, representing the bottom 50% of credit scores.

KakaoBank plans to increase mid-interest rate loans to 20.8% this year and 25% in 2022, aiming to meet its target by 2023. K Bank aims to raise this to 21.5% this year and 25% in 2022, also targeting achievement by 2023.

To this end, KakaoBank plans to accelerate mid- to low-credit loans by applying a new CSS as early as next week. As of the end of 2020, the amount of unsecured credit loans to mid- to low-credit customers was 1.438 trillion KRW, and the bank intends to expand this 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 the year is expected to be 250 billion KRW. In August, KakaoBank will launch a new credit loan product to meet the diverse needs of mid- to low-credit customers. The final stages of system work are currently underway.

K Bank, having welcomed BC Card as a major shareholder, is preparing to expand mid- to low-credit loans through CSS advancement and capital expansion. In particular, while the existing CSS only used limited data such as KT’s user information, K Bank is incorporating BC Card’s data and aiming for advancement and stabilization by the second half of this year.

Capital strengthening to catch up with KakaoBank is also underway. Last month, K Bank approved a paid-in capital increase of 1.25 trillion KRW to expand mid-interest rate loans. Once the capital increase is completed, K Bank’s capital will increase from 91.7 billion KRW to 2.1515 trillion KRW, more than doubling. This will put it on par with KakaoBank’s capital of 2.0383 trillion KRW. A K Bank official said, “We plan to continuously expand loan supply to mid- to low-credit borrowers,” adding, “We are preparing a related TF and plan to launch the Saetdol loan soon.”

Toss Bank, set to launch in the second half, is showing the most aggressive stance among internet banks, setting targets for mid- to low-credit borrower credit loans at 34.9% by the end of this year, 42% in 2022, and 44% in 2023.

Toss plans to inject part of the 500 billion KRW investment secured through a paid-in capital increase for Toss Bank’s stabilization. Toss is also confident in its CSS. Currently, Toss’s subscriber base is approaching 20 million. It is expected to develop a sophisticated and advanced credit scoring model by incorporating not only data from existing personal credit bureaus (CB) but also customer data within the Toss app.

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