Kakao Bank Loans: Rising Interest Rates and Reduced Limits Spark Complaints... "An Inevitable Choice"

"An Inevitable Choice to Expand Loan Supply for Low- to Medium-Credit Borrowers"

[Asia Economy Reporter Park Sun-mi]"KakaoBank's competitiveness in loan interest rates and limits has disappeared. It seems they no longer pass on the cost savings from non-face-to-face services to customer benefits."

As KakaoBank rapidly raises loan interest rates and reduces loan limits, its previously strong appeal of easy, fast, and sufficient loans is sharply declining. KakaoBank states that under the requirement to manage total loan volume and to accelerate loan supply to low- and medium-credit borrowers as demanded by the government and financial authorities, these measures were unavoidable.

According to the Bankers Association on the 10th, KakaoBank's average interest rate for overdraft accounts disclosed last month was 3.72%. This is up to 0.63 percentage points higher than the average overdraft interest rates of 3.09% to 3.48% at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup (based on borrowers with credit ratings 1 to 2). The average interest rate across all credit ratings is also highest at KakaoBank at 3.73%, compared to 3.26% to 3.70% at the five major banks.

Two years ago, KakaoBank's overdraft loan interest rate for credit ratings 1 to 2 was around 3.14%, much lower than the 3.24% to 3.81% range of the five major banks, but now it has reversed. Currently, KakaoBank applies overdraft interest rates of 3.31% to 5.54% annually and general credit loans at 2.81% to 5.64% annually.

Loan limits have also been significantly reduced. While commercial banks limit maximum credit loans to within annual income and overdraft limits to 50 million KRW, KakaoBank reduced its credit loan limit from 70 million KRW to 50 million KRW and overdraft limit from 50 million KRW to 30 million KRW starting from the 8th.

Deposit and savings interest rates are also considered less attractive than those of commercial banks. For flexible installment deposits, KakaoBank's highest interest rate is 1.80% for 12 months, lagging behind commercial banks like Woori Bank at 3.0% and KB Kookmin Bank at 2.95%, which offer rates in the 2-3% range.

A KakaoBank customer said, "There was a time when even bank employees would try to get KakaoBank overdrafts because of its competitive interest rates and limits, but the atmosphere has completely changed," adding, "Nowadays, people say it's better to use general commercial banks where they have their main accounts." Some critics argue that KakaoBank, which grew explosively, is raising loan interest rates and lowering deposit rates compared to commercial banks with branches, possibly to run an interest business with lower costs.

Moreover, KakaoBank's stock price, which rose to 92,000 KRW at closing after its listing last month, has fallen for seven consecutive trading days as of this day, nearing a break below 70,000 KRW, disappointing investors. The dominant analysis is that financial authorities, who had actively supported big tech's entry into finance by promoting innovative finance, have recently tightened regulations on financial platforms, causing headwinds for Kakao Group's financial affiliates.

A commercial bank official said, "KakaoBank, which had rapidly expanded its business, is now under pressure from financial authorities to manage total household loans and increase the proportion of loans to low- and medium-credit borrowers," adding, "The financial authorities maintain a firm stance of 'same regulation for same functions' regardless of whether it's big tech or fintech, so Kakao's financial business expansion strategy may also see changes."

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