Financial Sector 'Buzzing' Over Pressure to Introduce Debt Consolidation Loan Platform for 'Yeongkkeuljok'

[Image source=Yonhap News]

[Asia Economy Reporter Bu Aeri] As voices calling for the introduction of a refinancing loan platform to reduce interest burdens arise in the National Assembly, the financial sector is in turmoil. Financial authorities are gathering opinions from each industry, while traditional financial institutions are concerned about dependence on big tech.

According to the financial sector on the 10th, financial authorities have recently been collecting opinions regarding the introduction of a refinancing loan platform. Lee Hyung-joo, Director of the Financial Industry Bureau at the Financial Services Commission, said, "There are various opinions about the refinancing loan platform. All credit finance institutions are included, but opinions differ by institution," adding, "We are gathering opinions."

The refinancing loan platform is a service that allows consumers to compare interest rates and limits of loan products from multiple financial companies non-face-to-face and switch to loans with better conditions. Last year, the Financial Services Commission pushed for it, but the introduction was canceled due to opposition from the banking sector over big tech dependence.

However, recently, as both ruling and opposition parties have voiced support for the introduction of the refinancing loan platform amid rising interest rates, it has become a hot issue again. The ruling party, the People Power Party, has announced that it will hold a related party-government meeting once the Financial Services Commission chairman is appointed.

Seong Il-jong, Policy Committee Chair of the People Power Party, emphasized at a party floor meeting on the 5th, "This is a project that is more necessary than anything else in the current interest rate hike period," and urged, "Please quickly gather opinions from the financial sector and swiftly proceed with system construction to build a non-face-to-face platform that allows consumers to more easily switch from high-interest products to low-interest products."

Park Hong-geun, Floor Leader of the Democratic Party of Korea, also stated at the 'One-stop Loan Transfer System Introduction Meeting' on the 6th, "We have discussed measures to reduce the burden on low-credit borrowers and ordinary citizens through financial policies, and refinancing loans that switch to low-interest loans are an option to consider to reduce the burden on ordinary citizens," adding, "Although the project is currently suspended due to conflicts of interest among parties, given the emergency situation where the rapid rise in interest rates is increasing the burden on the people, the one-stop loan transfer system must be urgently introduced."

However, even before its introduction, signs of conflict are emerging between traditional financial institutions and emerging forces centered on big tech, such as internet-only banks. Recently, Toss Bank launched a pilot service that allows switching from card loans to unsecured loans but temporarily suspended it after a month. Toss Bank operated the service on a trial basis targeting Samsung Card’s card loans and planned to expand the target card companies. This has led to interpretations that strong opposition from the card industry influenced Toss Bank’s decision.

Traditional financial institutions are concerned about fintech taking the lead. They worry they will be reduced to merely providing product sourcing functions. They also harbor doubts about the transparency of product recommendation algorithms. A banking sector official said, "We cannot know if big tech will adjust algorithms to favor their own products," adding, "Regulations on big tech should also be applied fairly."

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