On-to-Company Cross Finance, 60 Billion KRW Early Payment Loan Repayment Delay

by Choi Seoyoon

Published 06 Aug.2024 19:57(KST)

The Financial Supervisory Service has launched an investigation into Cross Finance, an online investment-linked finance company (OnTu company), over delays in repaying advance payment loans amounting to 60 billion KRW.

According to financial sources on the 6th, the repayment delay arose as the PG company Lumen Payments failed to return the invested funds.

The longer Lumen Payments delays repayment, the greater the risk that investors will not recover their principal, and it is known that most of Cross Finance's advance payment loan investment products are linked to Lumen Payments.

On the same day, Cross Finance announced, "We are taking legal action against the linked borrowers and payment gateway companies," adding, "We will take all necessary measures to protect linked investors."

Cross Finance has currently suspended operations to prevent further investor damage. As an OnTu company, Cross Finance acts as an intermediary between advance payment companies (borrowers) and investors. The structure involves advance payment companies purchasing merchant card sales receivables at a discounted price, then raising loans by recruiting investors through the OnTu company using these receivables as collateral.

Cross Finance Advance Loan [Image source=Captured from Cross Finance homepage]

When an advance payment company applies for a loan, the OnTu company verifies the merchant card sales settlement amount from the electronic payment gateway company (PG company) and then provides the investment funds to the advance payment company. At this time, the PG company is responsible for settling the investment funds.

Within the OnTu industry, it is also seen that the demand for advance payment loan-related products has decreased following the unsettled payment incidents involving Tmon and Wemakeprice, leading to reduced liquidity for advance payment companies, which is considered a background factor for the current repayment delay. A Financial Supervisory Service official stated, "We are looking into the reasons behind the repayment delay at Lumen Payments."

Meanwhile, four OnTu companies sold investment products secured by settlement claims of Tmon and Wemakeprice sellers, with the scale known to be just under 3 billion KRW.