Despite OntoUp's Official Launch, Loan Balances Decline... Will Performance Rebound in the Second Half? (Comprehensive)

Three On-to-Loan Companies' Loan Balances Total 223.2 Billion KRW Last Month
Down 53.4 Billion KRW (19.3%) from 276.6 Billion KRW at the Start of the Year
On-to-Loan Industry Says "Initial Soft Landing Period Needed"

[Asia Economy Reporter Song Seung-seop] The online investment-linked finance (P2P) industry is struggling to gain momentum. Despite receiving official approval from financial authorities, it has failed to achieve notable results or performance. Although it claims to be innovative finance, it has yet to establish itself as an attractive option for consumers.

According to the industry on the 12th, the loan balance of three online investment companies?8 Percent, Lendit, and PeopleFund?last month was 223.2 billion KRW. This is a decrease of 9.3 billion KRW from the previous month’s 232.5 billion KRW. Compared to the loan balance of 276.6 billion KRW in January, it has dropped by 53.4 billion KRW (19.3%). Except for a single 400 million KRW increase by 8 Percent in May, all companies have recorded a monthly decline since the beginning of this year.

These three companies are financial firms that first settled within the regulatory framework after the implementation of the Online Investment-Linked Finance Act on August 27 last year. The Act stipulates that to operate a P2P business, companies must meet various requirements and register officially with financial authorities by the end of August. Although they received official approval from the Financial Services Commission about a month ago on the 10th of last month, their loan balance has actually shrunk.

The growth in cumulative loan amounts also recorded the lowest level this year. Last month, the cumulative loan amount in the online investment industry was 17.0074 trillion KRW, increasing by only 13.3 billion KRW. This is 2.3 billion KRW less than the 15.6 billion KRW increase recorded the previous month. Compared to the first quarter, when loans increased by 16 to 18 billion KRW monthly, the decline is even more pronounced.

The delinquency rate rose by 0.36 percentage points to 5.25%, up from 4.89% before approval. However, this is a slight decrease compared to the peak of 5.66% earlier this year.

Industry Says "Soft Landing Period Needed... Major Deals Expected in Second Half"

The situation is similar for P2P companies that have not received approval. According to Midrate, a P2P financial company disclosure site, the total loan balance of the entire P2P industry last month was 1.7463 trillion KRW, down 54.1 billion KRW (5.41%) from 1.8463 trillion KRW the previous month. Compared to January, it decreased by 13.35% (269.2 billion KRW). The overall industry delinquency rate remains high at 22.17%.

This atmosphere is quite different from internet-only banks, which have shown explosive growth from the start by promoting "24-hour innovative finance without branches." K Bank, launched in January 2017 as the first internet bank, quickly absorbed customers from commercial banks and threatened the traditional financial sector. Within a month of its launch, it attracted about 250,000 customers, outpacing commercial banks in customer acquisition speed.

Kakao Bank, launched in July of the same year, surpassed the total number of non-face-to-face account openings of all commercial banks (155,000 accounts) within 11 hours on its first day. The average daily account openings during the first 30 days reached 100,000. The loan and deposit amounts achieved during this period were 1.409 trillion KRW and 1.958 trillion KRW, respectively.

Industry insiders explain that a "soft landing" period is necessary. Given the many stringent regulations, it inevitably takes time to conduct aggressive marketing. One industry insider said, "During the preparation of the new system for online investment-linked finance, loan and investment operations were temporarily suspended. We expect rapid growth starting in the second half through investment attraction and other efforts."

Another company representative added, "There were many tasks to complete even after registering as an online investment company to focus on loan-related services. We understand that from July to August, major deals such as equity investments and bond investments will emerge across the online investment industry, which will change the growth trajectory."

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