'New Growth Path: Corporate Loans and Overseas Expansion'... Internet Banks Adjust Strategies Amid Household Loan Regulations

The three major internet-only banks-KakaoBank, Toss Bank, and K-Bank-are ramping up efforts to attract customers and secure competitiveness in lending by expanding into corporate loans and exploring overseas financial markets. As financial authorities have tightened total household loan regulations and strictly manage mortgage lending, these banks are seeking new growth engines in areas with relatively less stringent regulations.

According to the financial sector as of April 29, K-Bank’s apartment mortgage interest rates were between 3.72% and 8.50% per annum as of the previous day, while KakaoBank’s mortgage rates ranged from 4.29% to 6.92%. Compared to traditional banks, where mortgage rates are between 3.61% and 6.01% per annum, K-Bank’s lower and upper bounds are higher by 0.11 percentage points and 2.49 percentage points, respectively. Notably, KakaoBank’s lower mortgage rate rose by 0.1 percentage points and the upper by 0.59 percentage points over the past week, showing a sharp upward trend.

The household loan-to-deposit interest margin (loan interest rate minus deposit interest rate) is also maintained at about twice the level of the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup). According to the Korea Federation of Banks, last month the average household loan-to-deposit interest margin (excluding policy-based inclusive finance) at the five major banks was 1.512%, whereas for internet banks, Toss Bank recorded 3.20 percentage points, K-Bank 2.43 percentage points, and KakaoBank 1.64 percentage points.

This is interpreted as a stopgap measure to defend interest margins amid total household loan regulations. As of the end of last year, the total deposit balance at the three internet banks was 126.7986 trillion won, while the total loan balance was only 80.6306 trillion won. Unlike traditional banks, which maintain a loan-to-deposit ratio of around 95-100%, the average loan-to-deposit ratio at the three internet banks is only 65.4%, highlighting the urgent need to actively expand lending.

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Internet banks are finding a breakthrough by boosting their corporate finance operations. As of December last year, compared to the previous year, the outstanding balance of corporate loans at Toss Bank decreased by 7.5%, while KakaoBank and K-Bank saw sharp increases of 61.23% and 100.69%, respectively.

They are actively entering the real estate-backed loan sector for small business owners, self-employed individuals (SMEs), and sole proprietors. KakaoBank currently offers real estate-backed loans for sole proprietors (up to 20 years, maximum 1 billion won), which allows applications for junior loans even if a senior mortgage is already established. In fact, 4 out of 5 customers are using junior loans, and interest rates can be up to 0.75 percentage points lower, providing a minimum interest rate in the 2% range per annum. Additionally, it has expanded the proportion of loans to SOHO borrowers with credit grades 4 or lower to 50%, and increased the outstanding balance of sole proprietor loans from 1.9 trillion won in 2024 to 3.1 trillion won in just one year (an increase of 1.2 trillion won).

K-Bank, which has set a goal to balance household and corporate loans at a 5:5 ratio by 2030, also expanded its corporate loan balance from 1.1514 trillion won to 2.3107 trillion won, focusing on SME finance. In particular, it increased the amount of credit guarantee foundation-backed loans from 177.6 billion won to 319.6 billion won, securing both scale and soundness. An industry insider commented, "While traditional banks were reducing loans to sole proprietors, internet banks effectively filled the gap. This not only increased their own lending portfolio but also improved access to finance for vulnerable groups, contributing to inclusive finance."

From this year, internet banks are also strengthening regional corporate finance by partnering with regional banks to launch joint lending businesses. As internet banks cannot operate face-to-face branches, such partnerships allow them to leverage the local sales infrastructure and corporate lending know-how of regional banks. Conversely, regional banks can enhance their sales capabilities through the digital infrastructure of internet banks. Loan applicants also benefit by being assessed by both banks and obtaining loans at optimal conditions. Currently, the Toss Bank-Gwangju Bank partnership serves as a model, with K-Bank collaborating with Busan Bank and KakaoBank with Jeonbuk Bank.

Internet banks are accelerating their overseas expansion by leveraging their accumulated IT capabilities to offer financial platforms-including payment, remittance, and credit evaluation-in foreign markets, while also expanding services for foreigners. KakaoBank, the first among domestic internet banks to implement a platform partnership strategy, is operating Superbank in Indonesia, has acquired a Bank X license in Thailand, and plans to enter Mongolia this year. K-Bank is collaborating with Kasikornbank, Thailand’s largest commercial bank, to develop a blockchain-based cross-border payment and remittance system, and earlier this year began proof-of-concept (PoC) testing for stablecoin-based remittance technology with Chainzer, a digital asset company in the United Arab Emirates (UAE). Toss Bank is seeking global expansion centered on Banking-as-a-Service (BaaS), providing financial functions in the form of APIs.

To serve foreigners, internet banks are offering non-face-to-face accounts for foreigners and foreign registration certificate verification services. In the case of KakaoBank, AI translation services will be offered within the year, and plans are in place to drive innovation in global remittance and payment infrastructure through the issuance and distribution of stablecoins in the future. An internet bank official stated, "The financial ecosystem is changing due to an inclusive and productive financial approach, as well as technological advancements. By invigorating corporate finance, we aim to secure competitiveness and, at the same time, provide IT-based financial solutions unique to internet banks for overseas corporations and financial institutions, ensuring sustainable earnings."

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