Inbaeng, TF Formation and CSS Advancement... Emerging as a New Battleground in the Mid-Interest Rate Market

KakaoBank Appoints Vice President as TF Leader
Preparing for Speed Race with K Bank and Toss Bank

[Asia Economy Reporter Kiho Sung] Internet-only banks are intensifying competition in the mid- to low-credit borrower loan market. KakaoBank has launched a related task force (TF) and is preparing an advanced credit scoring system (CSS). K Bank is also working to expand its scale by increasing capital through a paid-in capital increase along with a new CSS. Toss Bank, set to launch in the second half of the year, has announced a target of 34.9% for the proportion of mid- to low-credit borrower loans in its first year, signaling a serious competition.

KakaoBank has taken the initiative in the mid- to low-credit borrower loan market competition. According to the internet banking industry on the 5th, KakaoBank recently prioritized company-wide resources to expand credit loans for mid- to low-credit customers and formed a ‘Mid- to Low-Credit Customer Loan Expansion TF’ to execute this plan. The TF is led by Kim Kwang-ok, KakaoBank’s Deputy CEO in charge of overall management strategy, with Business Chief Officer (CBO) Lee Hyung-joo, Service Chief Officer (CSO) Ko Jung-hee, Risk Management Chief Officer (CRO) Kim Seok, and heads of related departments participating.

TF leader Kim Kwang-ok explained the background of the TF formation, saying, “To expand loans for mid- to 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 advance the schedule for launching related products and services as much as possible and strengthen customer-facing promotions and advertising to expand loan supply.”

Earlier, the Financial Services Commission announced on the 27th of last month the ‘Internet-only Banks Mid- to Low-Credit Borrower Loan Expansion Plan,’ stating that internet-only 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 lower, 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 the target by 2023. K Bank plans to increase to 21.5% this year and 25% in 2022, also aiming to achieve the target by 2023.

To this end, KakaoBank plans to accelerate mid- to low-credit loans by applying the 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 KRW 1.438 trillion, and the plan is to expand this to KRW 3.1982 trillion by the end of this year. The annual net increase target is KRW 1.7602 trillion. Considering the net increase over the past five months, the average monthly net loan increase from June to the end of the year is KRW 250 billion. In August, KakaoBank will launch a new credit loan product that meets the diverse needs of mid- to low-credit customers. The final system work is currently underway.

K Bank is preparing to expand mid- to low-credit borrower loans by enhancing its CSS and increasing capital after welcoming BC Card as a major shareholder. In particular, for the CSS, while previously only limited data such as KT’s user information was used, BC Card’s data is being additionally introduced, aiming for enhancement and stabilization in the second half of this year.

K Bank is also strengthening its capital to catch up with KakaoBank. Last month, K Bank approved a paid-in capital increase of KRW 1.25 trillion to expand mid-interest rate loans. Once the capital increase is completed, K Bank’s capital will increase from KRW 91.7 billion to KRW 2.1515 trillion, more than doubling. This will put it on par with KakaoBank’s capital size of KRW 2.0383 trillion. 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 as soon as possible.”

Toss Bank, set to launch in the second half of the year, is showing the most aggressive stance among internet-only banks, proposing a credit loan ratio for mid- to low-credit borrowers of 34.9% by the end of this year, 42% in 2022, and 44% in 2023.

Toss plans to inject part of the KRW 500 billion investment secured through a paid-in capital increase for Toss Bank’s stabilization. Additionally, Toss is confident in its CSS. Currently, Toss’s subscriber count is approaching 20 million. It is expected to develop a sophisticated and advanced credit scoring model by reflecting 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.