Financial Disruptor 'Kabang's' Full-Scale Offensive... Credit Loan Balance Surpasses 14 Trillion (Comprehensive)

Established as the No.1 Internet Bank
Fast Loans with Deposits Within 10 Minutes
Popular Among Customers in Their 20s and 30s

[Asia Economy Reporter Kim Min-young] KakaoBank, the 'catfish' of the financial sector celebrating its 3rd anniversary this month, is experiencing explosive growth in loan operations by leveraging attractive interest rates and convenience. It is evaluated that its lending business has been firmly established, with the balance of personal loans sold over the past three years exceeding 14 trillion won. As KakaoBank is expected to take an aggressive approach with differentiated strategies from commercial banks, such as self-employed and mid-interest loans in addition to personal loans, competition with commercial banks is also anticipated to intensify.

According to the financial sector on the 6th, as of the end of last month, KakaoBank's personal loan balance was recorded at 14.0749 trillion won. The balance of personal loan products launched since starting operations in July 2017 was 367.2 billion won in the first month. This means it has grown 38.3 times in just three years.

The personal loan balance includes not only individual personal loans but also small emergency loans under 3 million won, overdraft loans, and loans for sole proprietors. About a year after launch, at the end of June 2018, it recorded 6.5332 trillion won, and by June last year, it reached 9.8181 trillion won.

The 'quick loan,' which can be deposited within 10 minutes without visiting a bank, captivated customers in their 20s and 30s. Especially, the convenience of KakaoBank's personal loans became widely known in conjunction with the sudden 'Donghak Ant' stock investment craze in the first half of the year. Stories like "I received a personal loan from KakaoBank in a few minutes, invested in stocks, and made money" were frequently heard.

Interest rates are also relatively low. KakaoBank's personal loan product interest rates start as low as 2.22% per annum for high-credit salaried workers. The interest rate for sole proprietor loans, mainly used by freelancers or self-employed individuals with an annual income of over 10 million won, is also attractive at a minimum of 3.25%, compared to commercial banks.

Jeonse deposit loans have also shown explosive growth. This product, which sold only 200 million won in its first month of launch in January 2018, recorded a balance of 3.2703 trillion won at the end of last month. A KakaoBank Jeonse loan user said, "It was surprising that I could apply for and execute the loan via smartphone, and borrow several hundred million won easily after a few calls with a consultant." KakaoBank's total lending amount exceeded 17.3 trillion won as of the end of last month.

Loans are executed with just a few consultation calls and applications via smartphone, establishing KakaoBank early on as a symbol of non-face-to-face (untact) loans. To get a Jeonse loan from commercial banks, customers had to visit branches with documents such as proof of deposit payment, employment certificates, and income verification, which was inconvenient. KakaoBank resolved this with just one digital certificate.

Competition in personal loans with commercial banks is expected to intensify going forward. Major banks such as Shinhan, KB Kookmin, Hana, and Woori have also strengthened their non-face-to-face personal loan operations with easy limit inquiries and low interest rates. Although limited to credit grade 1, Shinhan Bank's personal loan interest rate reaches as low as 1.69%. The maximum limit is 200 million won, higher than KakaoBank's 150 million won. A financial sector official said, "It is obvious that existing banks would suffer losses if they compete on interest rates with KakaoBank, which has no offline branches," but added, "KakaoBank's influence in targeting young customers in the personal loan market is growing, so banks are lowering interest rates to attract customers."