Toss Bank, 'First in Banking' Surpasses 40% Loans to Medium and Low Credit Borrowers

2.7 Trillion Won in Mid-to-Low Credit Loans... Doubled Compared to First Half
Actively Utilizing Proprietary CSS to Discover 'Healthy Mid-to-Low Credit Borrowers'

[Asia Economy Reporter Minwoo Lee] Toss Bank has surpassed 40% in the proportion of low-to-medium credit borrowers among household loans, becoming the first in both internet-only banks and the first-tier financial sector (banks) to achieve this. By actively utilizing its own credit evaluation model to assess customers' actual repayment ability, it has identified sound low-to-medium credit borrowers and maintained a stable fixed non-performing loan ratio.

Toss Bank announced on the 21st that the outstanding balance of low-to-medium credit (KCB score 850 or below) household loans reached 2.7 trillion KRW as of the 19th. This more than doubled compared to 1.3338 trillion KRW as of June. The proportion of low-to-medium credit loans accounted for 40.1% of Toss Bank's total household loans. The share of low-to-medium credit borrowers increased by 8.7 percentage points compared to the first quarter of this year, surpassing 40% for the first time among first-tier financial institutions. As of the third quarter of this year, the proportions of low-to-medium credit loans at Kakao Bank and K Bank were 23.2% and 24.7%, respectively.

Nevertheless, as of last month, the fixed non-performing loan ratio was 0.32%, which is at the average level of the four major commercial banks in the third quarter of this year. This was attributed to the active use of its proprietary credit evaluation model (CSS) to identify sound low-to-medium credit borrowers.

Toss Bank re-evaluated more than one in four (25.7%) low-to-medium credit customers as high credit borrowers. Loans were extended even to those with a credit score of 475 (equivalent to grade 8 under the previous KCB standard), and these borrowers were able to improve their credit scores through diligent repayment.

The average loan amount per low-to-medium credit customer was 30.06 million KRW, and their average loan interest rate was found to be more than about 7 percentage points lower than the average of savings banks. Additionally, as the first in the domestic financial sector to introduce a service that extends the repayment period up to 10 years for customers with fixed interest rates and equal principal and interest repayments, it was explained that the average monthly principal and interest repayment amount per customer was reduced by about 350,000 KRW.

The proportion of low-to-medium credit in corporate loans was even higher. Among individual business owners, the share of low-to-medium credit loans reached 48.3% as of the 19th. In particular, vulnerable groups such as those in the transportation industry, who had difficulty receiving fair evaluations in the market, were accepted as sound low-to-medium credit borrowers by Toss Bank.

Refinancing loans, where customers switch their loans from other financial institutions to Toss Bank, have also increased. The ‘Boss Refinancing Loan’ service, launched in September in collaboration with the Korea Credit Guarantee Fund, exceeded 30 billion KRW in loan balance within two months of its launch. This is the second-largest scale across all banks, following KB Kookmin Bank. Among refinancing loans, 82.4% were transferred from savings banks, card companies, and capital companies. It is interpreted that fixed-rate loan demand surged among small business owners and self-employed individuals facing business difficulties due to COVID-19.

Meanwhile, the total credit, combining household and corporate loans, reached 8 trillion KRW, more than 15 times the 531.5 billion KRW at the end of last year. A Toss Bank official stated, “We will continue to prove with numbers the ‘inclusive finance’ we have promised our customers since our launch while maintaining the bank’s soundness,” adding, “We will establish ourselves as a trusted bank that fulfills its role by addressing various market funding demands and financial blind spots, such as loans to individual business owners.”

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