Expanding 'In-Bank'... Toss Bank Obtains Final Approval and Launches in September (Comprehensive)

Financial Services Commission Imposes Condition to 'Faithfully Implement Capital Increase Plan'
Three-Way Battle Predicted with KakaoBank and K Bank

[Asia Economy reporters Kwangho Lee and Kiho Sung] Viva Republica, the operator of the financial platform Toss, has received approval from financial authorities to operate as an internet-only bank. Toss Bank, the third internet-only bank following K-Bank and Kakao Bank, is expected to launch as early as September.

The Financial Services Commission announced on the 9th that it approved the "Toss Bank banking business final approval agenda" at its regular meeting.

Toss Bank applied for final approval in February last year. After a thorough review including an on-site inspection by the Financial Supervisory Service, it met all approval requirements such as capital requirements, appropriateness of funding plans, shareholder composition plans, business plans, executive and employee qualifications, and requirements for personnel, business facilities, and IT systems.

The Financial Services Commission imposed the faithful implementation of the capital increase plan as a condition to ensure Toss Bank’s smooth growth. Toss Bank must carry out its capital increase plan by 2025, the expected breakeven point.

Chairman Eun Sung-soo said, "The emergence of a new internet bank is expected to greatly contribute to expanding consumer choice and accelerating competition and innovation in the financial industry," and urged, "Please thoroughly prepare to establish a flawless financial security system and protect consumers before starting operations."

He added, "Please actively engage in inclusive finance, including loans to medium- and low-credit borrowers, by utilizing the data accumulated through the Toss platform and fintech technology."

Toss Bank plans to officially start operations as early as September after conducting actual transaction tests and linking with other institutions such as the Korea Financial Telecommunications & Clearings Institute’s payment network. According to banking laws, operations must begin within six months after final approval.

A Financial Services Commission official said, "We plan to temporarily operate an on-site support team for internet banks to help newly established internet-only banks stabilize their management early."

The financial sector is paying close attention to Toss Bank. The reason is the "catfish effect" brought by the third internet bank, where the entry of a strong competitor raises the competitiveness of existing players. The emergence of Toss Bank inevitably changes the existing competitive structure dominated by Kakao Bank and K-Bank. Savings banks targeting overlapping customer segments are also closely watching Toss’s moves.

The biggest changes are expected in the mid-interest loan sector. Currently, financial authorities are encouraging internet banks to expand mid-interest loans. Last month, the Financial Services Commission announced a plan to increase mid-interest loans by requiring internet banks to allocate at least 30% of their unsecured loans to borrowers with credit ratings of grade 4 or lower by the end of 2023.

In its business plan submitted to financial authorities, Toss Bank reported that it aims to have mid-interest loans account for 34.9% of total loans by the end of this year after its launch. By the end of 2023, it pledged to raise the proportion of mid-interest loans to 44%, about half of total loans. This surpasses the plans of Kakao Bank and K-Bank, which aim to expand to 30% by 2023.

Industry insiders view Toss’s aggressive mid-interest loan expansion as not only aligning with financial authorities’ policy direction but also as a "differentiation strategy" distinct from existing internet-only banks.

As the launch of Toss Bank approaches, the mid-interest loan market is already becoming a battleground. Kakao Bank recently announced plans to expand mid-credit loans and applied a new credit scoring system (CSS), increasing the maximum limit for mid-credit loan products to 100 million KRW. K-Bank is also responding by enhancing its CSS and conducting a record-sized paid-in capital increase of 1.25 trillion KRW last month.

An industry official said, "The launch of the third internet bank means more choices for customers and more active service competition in the industry. Especially in mid-interest loans, there is a high possibility of entering interest rate competition, and future success will likely depend on screening and risk management."

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