Hong Min-taek, CEO of Toss Bank, "Discovering Healthy Low-to-Mid Credit Customers and Attracting Them as Clients" (Comprehensive)

Toss Bank Officially Launches
"Will Become a 'New Bank'"

[Asia Economy Reporter Kiho Sung] Toss Bank, the third internet-only bank, officially launched on the 5th, declaring itself as a ‘completely new bank.’ Starting from this day, Toss Bank will begin sequential service rollouts, beginning with customers who participated in the pre-registration. Toss Bank plans to embrace about 30% of those who found it difficult to get loans from existing first-tier financial institutions as ‘healthy middle- and low-credit borrowers’ and make them Toss Bank customers.

Hong Min-taek, CEO of Toss Bank, stated at an online press conference held on the same day, “A bank is a place where customers save and grow their money and borrow at appropriate interest rates when needed,” adding, “Toss Bank aims not to be just a better bank but a ‘new bank.’”

Toss Bank attracted attention from the pre-registration stage. More than one million customers flocked to the pre-registration that began on the 10th of last month. Customers who pre-registered will receive notification messages in order, and after completing the Toss Bank sign-up process, they can use all services without restrictions, including account opening, credit loan inquiry and execution, and check card issuance. If you have not yet participated in the pre-registration, you can do so via the home screen banner or the ‘Toss Bank’ page in the full tab within the Toss application (app).

The credit loan product unveiled for the first time on this day offered a wide range of interest rates from a minimum annual rate of 2.76% to a maximum of 15.00%. Toss Bank plans to provide fair credit evaluations and offer reasonable interest rates and loan limits not only to high-credit borrowers but also to middle- and low-credit borrowers and 13 million new filers (those with insufficient financial history). The credit loan limit ranges from a minimum of 1 million KRW to a maximum of 270 million KRW. The ‘Toss Bank Minus Account,’ which charges interest only on the amount used, and the ‘Toss Bank Emergency Loan’ with a maximum limit of 3 million KRW were also introduced on this day.

CEO Hong said, “Toss Bank provides the optimal loan interest rate and limit through a single credit loan product without distinguishing between salaried workers, self-employed, prime, or mid-interest loans,” adding, “We have lowered the bank’s threshold through policies that embrace a wide range of customers, including middle- and low-credit borrowers.”

Regarding the loan regulations promoted by the government, he stated, “Toss Bank, as a commercial bank, is subject to the same regulatory environment as other banks,” and “We plan to cooperate with the policy directions promoted by the government.”

The simple loan interest rate inquiry and execution process also drew attention. Customers can check their loan limit and interest rate with a single inquiry and execute the loan with one approval. Toss Bank’s ‘My Limit Management Service’ notifies customers in advance of changes in loan interest rates and limits due to fluctuations in their credit rating. Additionally, if a loan customer’s credit score improves and conditions for lowering the interest rate are met, Toss Bank sends a notification to execute a ‘continuous interest rate reduction request’ first.

In a Q&A session, CEO Hong introduced that Toss Bank shares its operational security system with Toss, which has 20 million subscribers. He also announced that related services will soon be unveiled to allow foreign customers residing in Korea to use the service.

CEO Hong pledged, “We will continue to strive to eliminate all restrictions that were passed on to customers and use new technologies and data to provide the best benefits to customers.”

Below is the Q&A with CEO Hong.

- The market is highly interested in the account offering an annual 2% interest rate and the groundbreaking deposit product. How long do you plan to offer the 2% annual interest rate? Is there a limit to the amount customers can deposit?

▲ The 2% annual interest rate is higher than other banks but not significantly higher than the current funding cost, and it is considered a manageable expense. As a commercial bank, Toss Bank must comply with government regulations on soundness and profitability, and we have created a product that can sustainably offer 2% interest while adhering to all these regulations.

- With recent government regulations tightening household loans, does Toss Bank also face such regulations? If so, what is Toss Bank’s target loan scale for credit loans? Is there a limit on the scale of middle- and low-credit loans?

▲ Toss Bank, as a commercial bank, is subject to the same regulatory environment as other banks. Accordingly, we agree with and plan to cooperate with the government’s policy directions. Since we are just starting operations, it is too early to predict the exact loan scale. The loan scale target may change flexibly depending on government policies, market conditions, and customer demand during the business process.

- Toss Bank’s target for middle- and low-credit loan supply is 34.9% within the year, which is higher than other internet banks. Is it achievable in the fourth quarter, within three months?

▲ Toss Bank prioritizes the mission of internet banks to embrace middle- and low-credit borrowers. We are well aware of the market’s assessment that existing internet banks focused on high-credit borrowers. We will strive to maintain profitability and soundness in operating loan products while aligning with government policy directions. Strategies to achieve the middle- and low-credit borrower targets are prepared. We plan to provide stable funding and loans to many middle- and low-credit borrowers.

- Compared to other banks, Toss Bank offers lower credit loan interest rates and higher limits. Is this an early-stage business strategy?

▲ Toss Bank’s minimum interest rate of 2.76% and maximum limit of 270 million KRW should be understood as the range across all credit products. The minimum interest rate and maximum limit do not apply to everyone. The credit evaluation system is designed so that customers are evaluated more fairly and receive better limits and interest rates.

- Are there plans to launch mortgage loans and jeonse (key money deposit) loans?

▲ We aim to prepare jeonse loans by next year. For mortgage loans, the entire process of customers receiving mortgage loans needs to be non-face-to-face, so we have just started reviewing these policy and legal aspects.

- Are there plans to launch credit cards?

▲ To operate a credit card business, we need to obtain a license and are currently in initial discussions and negotiations with the government. You can understand that we are interested in the credit card business and have started discussions with the government.

- What is the timing, method, and scale of capital increase for Toss Bank’s capital expansion?

▲ We previously shared a plan to increase capital by about 1 trillion KRW over five years, which should be considered a baseline. If Toss Bank’s customer acquisition is successful, the priority is to provide services to the market without interruption, and all shareholders of Toss Bank have pre-agreed to enable faster and larger capital increases.

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