Kakao Bank Applies New Credit Scoring Model... Expands Mid-Tier Credit Loans Up to 100 Million KRW

[Asia Economy Reporter Kiho Sung] KakaoBank announced on the 9th that it has applied a new Credit Scoring System (CSS) and expanded the maximum limit of the KakaoBank ‘Mid-Credit Loan’ product, available to customers with a credit score (KCB standard) of 820 or below, to 100 million KRW. Additionally, the additional interest rate for the ‘Mid-Credit Loan’ product was lowered by about 1.5 percentage points, making the lowest interest rate 2.98% as of that day.

According to KakaoBank, the new CSS has been reflected since 6 a.m. on the same day. This CSS is characterized by establishing a foundation to apply data from various fields by adding telecommunication information such as payment information for telecommunication fees and usage information of telecommunication billing services held by the three major mobile carriers to the financial transaction data of loan applicants accumulated since KakaoBank started its service in July 2017.

In particular, a separate credit scoring model was developed and applied for mid- to low-credit and customers with insufficient financial history. The new credit scoring model, which applies machine learning methods, allows for more detailed evaluation than before, and it is expected to improve discrimination for loan customers as well as expand the range of loan customers and the amount of loans available.

KakaoBank decided to increase the loan limit of the ‘Mid-Credit Loan’ from a maximum of 70 million KRW to 100 million KRW and reduce the interest rate by up to 1.52 percentage points along with the application of the new credit scoring model. KakaoBank had expanded the loan limit from 50 million KRW to 70 million KRW in March and lowered the loan interest rate by up to 1.2 percentage points in May.

CSS improvements will continue. In the second half of this year, analysis results of small mobile payment information and sales data of individual business owners will be reflected. Data cooperation with the Kakao community, which started with Kakao Pay, is also accelerating. In 2022, non-financial information held by the Kakao community will be analyzed and applied.

Kim Kwangok, Head of the Task Force (Vice President) for Expanding Loans to Mid- and Low-Credit Customers at KakaoBank, said, “The new credit scoring model developed using machine learning methods by reflecting telecommunication information on the 25 million loan application data of KakaoBank was analyzed to improve the credit evaluation discrimination for loan applicants with a credit score of 820 or below,” adding, “We will accelerate innovation to provide customers with more competitive interest rates and loan limits.”

KakaoBank plans to expand the loan balance for mid- and low-credit customers from 1.438 trillion KRW at the end of last year to 3.1982 trillion KRW by the end of this year. The annual net increase target is 1.7602 trillion KRW.

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