Despite the Cold Wave in the Banking Sector... Internet Banks Expanding Loans for Medium to Low Credit Borrowers

Kakao Bank and K Bank Share in Early 10% Range
Target to Expand to 20% by Year-End
Developing Specialized Credit Evaluation Model

[Asia Economy Reporter Kiho Sung] The proportion of loans to low- and medium-credit borrowers at internet-only banks KakaoBank and K Bank remains in the low teens. Both banks plan to raise the share of loans to low- and medium-credit borrowers to 20% by the end of this year, so despite the lending freeze in the banking sector, it is expected that internet banks will continue to expand loans to low- and medium-credit borrowers.

According to the proportion of unsecured loans to low- and medium-credit borrowers (based on outstanding balance) disclosed by the Korea Federation of Banks on the 31st, KakaoBank's share fell from 10.2% at the end of December last year to 10% at the end of March this year, then increased by 0.6 percentage points to 10.6% at the end of June. This is the first time that the proportion of unsecured loans to low- and medium-credit borrowers at internet banks has been made public.

KakaoBank has been significantly expanding loans to low- and medium-credit borrowers since June. According to KakaoBank, the supply of mid-interest rate loans, which was 87.6 billion KRW in June, increased to 114 billion KRW last month, and as of the 29th of this month, it reached 267.4 billion KRW, more than doubling in one month. KakaoBank's share of loans to low- and medium-credit borrowers rose to the 12% range as of the end of August.

K Bank's share of loans to low- and medium-credit borrowers decreased from 21.4% at the end of December last year to 18.2% at the end of April this year, and 15.5% at the end of June. K Bank has submitted plans to financial authorities to raise the share of loans to low- and medium-credit borrowers to 21.5% by the end of December this year, 25% by the end of December next year, and 32% by the end of December 2023. KakaoBank also submitted targets to financial authorities to increase the share of unsecured loans to low- and medium-credit borrowers to 20.8% by the end of December this year, 25% by the end of December next year, and 30% by the end of December 2022.

Internet-only banks plan to focus on increasing the share of loans to low- and medium-credit borrowers in the second half of the year. A K Bank official explained, "After suspending loans for over a year, we resumed unsecured loans and overdraft accounts for office workers and loan products for low- and medium-credit borrowers all at once from July last year, which lowered the share of loans to low- and medium-credit borrowers. We are continuously launching related products to increase the share." In fact, since July this year, K Bank has expanded the limit of the ‘Credit Loan Plus’ product for medium-credit customers from 50 million KRW to 150 million KRW. In August, it also launched the Sa-itdol Loan, a mid-interest rate installment loan product.

KakaoBank also plans to develop specialized credit evaluation models for low- and medium-credit borrowers, such as using mobile phone micro-payment information and developing models for individual business owners using card merchant sales data. It also plans to continue efforts to attract customers, including supporting loan interest.

A KakaoBank official said, "Since June this year, we have supplied 469 billion KRW to low- and medium-credit customers based on our own credit (excluding guaranteed mid-interest rate products such as Sa-itdol Loan and Sunshine Loan), and as of the 29th of this month, the outstanding loan balance to low- and medium-credit customers stands at 1.7827 trillion KRW. We will strive to increase the proportion of low- and medium-credit customers through various measures."

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