CEO Kim, Feeling the Loan Cliff, Founded Rendit in Less Than 100 Days
Strict Regulations Also "Essential Requirements for Financial Companies"
Hints at Institutional Investor Participation and Bank-Linked Loans
[Asia Economy Reporter Song Seung-seop] "Why is there no middle interest rate?"
In 2015, Kim Seong-jun, CEO of Lendit, who was running a company in Silicon Valley, USA, had this question. When his financial situation worsened, he tried to urgently borrow 30 million won in Korea, but as a thin filer (a person with insufficient financial history), he could not even consider loans from commercial banks. Having no choice, he looked into second-tier financial institution loans and was shocked to find that he would have to pay an interest rate of 22% with a limit of 15 million won.
Feeling the "loan cliff," CEO Kim recalled the P2P (online investment-linked finance) model that was popular overseas at the time. Thus, within less than 100 days, he founded Lendit and launched the service in about a month.
After six and a half years since founding and one year and seven months since the law passed, CEO Kim, whose company became the first officially registered online investment-linked finance business (OnTu business) under the OnTu Business Act, emphasized repeatedly in an interview with Asia Economy on the 15th that "the industrial reason for the existence of OnTu business lies in solving the interest rate gap problem between first-tier and second-tier financial institutions." He explained that the OnTu business is a model that solves problems the government tried to address through qualitative improvement of household debt or inclusive finance at the private level. Since founding Lendit, Kim has been recognized for consistently advocating for legislation and leading the integration of P2P into the institutional financial system.
"Strict Compliance with Financial Regulations, Targeting Mid-credit Borrowers Using Second-tier Finance"
Along with innovation, careful preparation was made for the conservative financial industry regulations. CEO Kim recalled, "While our core competencies are big data analysis and advanced credit evaluation models, registering as an OnTu business requires meeting essential conditions as a financial company," adding, "Complying with financial requirements and internal controls was demanding." Nevertheless, given the many incidents and accidents, Kim believes that "appropriate and proper levels of regulation are necessary."
The process of reaching social consensus and being included in the institutional financial system was not smooth. The law proposed at the end of 2019 was enforced in August last year, and official registration was only completed last week. CEO Kim said, "Since the existing social consensus was formed over a considerable period, it is natural that it took time," but also admitted, "It was difficult to endure the indefinite waiting period caused by political conflicts in the National Assembly."
He also shared his views on the recently intensifying competition in the mid-interest loan market. Regarding internet-only banks that recently declared plans to increase related loans to about 30%, he said, "I do not consider them direct competitors," arguing that "internet banks compete with commercial banks." Instead, he explained, "P2P targets mid-credit customers who pay high interest rates at credit card companies, capital companies, and savings banks." He also expressed confidence in competitiveness, noting that half of the 230 billion won in loans executed over six years were refinancing loans transferred from second-tier financial institutions.
Looking ahead, he believes that as the OnTu business develops, it could enable collaboration with institutional investors for fund procurement or linked loans with commercial banks, similar to advanced countries overseas. CEO Kim forecasted, "Many institutional investors can participate in P2P, and their involvement can indirectly protect small investors who lack analytical capabilities. Like in the US and UK, collaboration could also be possible to connect customers rejected in mid-interest loan screenings to P2P companies."
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