Inbaeng 3 Companies Embrace 'Thin Filer' Strategy... Battle to Target Medium and Low Credit Loans

[Asia Economy Reporter Buaeri] Internet-only banks are expanding their lending to medium- and low-credit borrowers by adopting proprietary credit scoring models (CSS). KakaoBank, K Bank, and others are increasing their lending targets for medium- and low-credit borrowers this year while also focusing on targeting thin filers?those with insufficient financial history.

According to data disclosed by the Korea Federation of Banks on the 27th, KakaoBank plans to increase the share of loans to medium- and low-credit borrowers to 25% by the end of this year. By the end of next year, this share will expand to 30%. This represents a 13% increase from 17% as of December last year.

K Bank also announced plans to raise its share from 16.6% to 25% by the end of this year, and further to 32% by the end of next year. Toss Bank, which launched in October last year, has secured the highest share among the three. As of the end of December, Toss Bank’s share of loans to medium- and low-credit borrowers was 23.9%, with plans to expand this to 42% by the end of this year.

Although they fell short of the targets presented to financial authorities last year, internet banks explained that there were achievements in expanding loan volumes to medium- and low-credit borrowers. They plan to accelerate efforts this year through the advancement of CSS and other measures.

KakaoBank’s unsecured credit loans supplied to medium- and low-credit customers last year amounted to 1.7166 trillion KRW, a 3.7-fold increase compared to 467.9 billion KRW in 2020. KakaoBank reported that the outstanding balance of medium- 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 share of medium- and low-credit loans in total unsecured loans rose from 10.2% at the end of 2020 to 17% at the end of last year.

To expand medium- and low-credit loans, KakaoBank lowered loan interest rates and increased the loan limit to a maximum of 100 million KRW. A task force (TF) led by Vice President Kim Kwang-ok has been formed to focus the company’s capabilities. In August last year, based on the new CSS, KakaoBank launched the 'Medium Credit Plus Loan' and 'Medium Credit Emergency Loan.'

KakaoBank has set the expansion of medium- and low-credit loan supply as the top priority in its credit plan this year and plans to continue suspending new unsecured loans to high-credit customers. A KakaoBank official said, "We plan to advance the CSS and expand the scope of alternative information usage," adding, "We are collaborating on data with the Kakao community and Kyobo Group, and we will also develop a 'refinancing credit scoring model' for medium- and low-credit customers who use other financial institutions."

K Bank also announced that the total amount of unsecured loans supplied to medium- and low-credit customers from last year through February this year reached 1 trillion KRW. It 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 in the second half of last year, with 494.2 billion KRW supplied in that period alone. This amount is about 1.5 times the total supplied in 2020 (325.1 billion KRW). K Bank analyzed that this reflects the effect of significantly enhanced benefits for medium- and low-credit customers since the second half of last year.

K Bank is expanding unsecured loan supply to medium- and low-credit customers by providing loan interest support and a loan safety plan this year. As of February, the share reached 18%.

Internet-only banks see lending to medium- and low-credit borrowers as a good opportunity to attract customers. They can secure customers who find it difficult to get loans from commercial banks, and from the customers’ perspective, borrowing from a first-tier financial institution prevents credit rating deterioration. An internet bank official said, "We also see great business potential," adding, "Commercial banks mainly lend to high-credit customers and have credit rating barriers, but internet-only banks do not impose barriers on customers as long as they have a credit scoring model."

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