Kabang and Kebabang, Mid-to-Low Credit Borrowers' Loan Proportion in the High Teens... 'Target Not Met'

Toss Bank Records 23.9%

[Asia Economy Reporter Buaeri] As of the end of December last year, the proportion of credit loans to middle- and low-credit borrowers at KakaoBank and K Bank recorded in the mid-to-high teens. Toss Bank stood at 23.9%. These figures fall short of the initially planned 20.8%, 21.5%, and 34.9% by these banks.

This figure represents the proportion of loans to borrowers in the lower 50% credit score bracket (820 points or below) based on KCB standards within the total household credit loans of each internet-only bank.

According to the 'Proportion of Credit Loans to Middle- and Low-Credit Borrowers (based on balance)' disclosed by each internet-only bank to the Korea Federation of Banks on the 25th, KakaoBank recorded 13.4% at the end of September last year and 17% at the end of December.

The amount of unsecured credit loans supplied by KakaoBank to middle- and low-credit customers last year was 1.7166 trillion KRW, a 3.7-fold increase compared to 467.9 billion KRW in 2020.

KakaoBank announced that the balance of middle- and low-credit loans at the end of last year was 2.4643 trillion KRW, an increase of 1.0263 trillion KRW compared to the end of 2020, and the proportion of middle- and low-credit loans in total credit loans rose from 10.2% at the end of 2020 to 17% at the end of last year.

To expand middle- and low-credit loans, KakaoBank lowered loan interest rates and increased the loan limit to a maximum of 100 million KRW. Led by Vice President Kim Kwang-ok, a task force (TF) was formed to focus the company's capabilities. In August last year, based on a new credit scoring model (CSS), they launched 'Mid-Credit Plus Loan' and 'Mid-Credit Emergency Loan.'

KakaoBank plans to prioritize expanding the supply of middle- and low-credit loans in its credit plan this year as well and will continue to suspend new high-credit loans. A KakaoBank official said, "We plan to enhance the CSS and expand the scope of alternative information utilization," adding, "We are cooperating on data with the Kakao community and Kyobo Group, and will also develop a 'refinancing credit evaluation model' for middle- and low-credit customers using other financial institutions."

K Bank recorded a proportion of middle- and low-credit loans of 13.7% at the end of September last year and 16.6% at the end of December.

K Bank announced that the amount of credit loans supplied to middle- and low-credit customers from last year through February this year reached 1 trillion KRW. They handled 751 billion KRW last year and supplied about 250 billion KRW in the first two months of this year.

The increase was particularly notable from the second half of last year. They supplied 494.2 billion KRW in the second half alone, about 1.5 times the total amount supplied in 2020 (325.1 billion KRW). K Bank analyzed that this reflects the effect of significantly enhanced benefits for middle- and low-credit customers starting in the second half.

From September to the end of last year, K Bank held a loan interest support event for middle- and low-credit customers. They refunded loan interest to middle- and low-credit customers using K Bank's credit loan products. From November, they provided the 'Loan Safety Plan' free of charge. The Loan Safety Plan is a service that resolves situations where middle- and low-credit customers who have taken out loans are unable to repay due to major accidents or other serious incidents. K Bank bears 100% of the related costs.

This year, K Bank is expanding the supply of credit loans to middle- and low-credit customers by providing loan interest support and the Loan Safety Plan. As of February, the proportion reached 18%.

A K Bank official said, "Various efforts to strengthen benefits for middle- and low-credit customers since the second half of last year are showing results," adding, "In addition to differentiated benefits, we will further strive to expand loans to financially marginalized groups by introducing a credit evaluation model (CSS) specialized for thin-file customers."

Toss Bank, a latecomer, recorded the highest proportion among the three banks. Toss Bank, launched in October last year, had a proportion of middle- and low-credit loans of 23.9% as of the end of December, and plans to expand this proportion to 42% by the end of this year.

A Toss Bank official explained, "Because we had a credit evaluation model that could include middle- and low-credit borrowers, we were able to achieve a relatively high ratio," adding, "As of the end of February this year, it has risen to 30%."

Internet-only banks have agreed to raise the proportion of loans to middle- and low-credit borrowers to around 25% by the end of this year, with Toss Bank setting the highest target among the three at 42%. They also submitted plans to financial authorities to expand this proportion by the end of next year to 32% for K Bank, 30% for KakaoBank, and 44% for Toss Bank.

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