"Raising up to 20% by Year-End"... KakaoBank Accelerates Loans for Low-to-Mid Credit Borrowers

30 Billion KRW Supplied in August Alone... 10.2%
Expanded Loan Eligibility Range and Active Marketing

[Asia Economy Reporter Kiho Sung] KakaoBank is accelerating the supply of loans to low- and medium-credit borrowers. Over the three months from June to August, KakaoBank supplied approximately 500 billion KRW in unsecured loans to low- and medium-credit customers. Of this, the amount supplied in August alone reached 300 billion KRW. With a significant increase in loans to low- and medium-credit borrowers, a green light has been turned on for KakaoBank’s plan to fill 20% of unsecured credit loans with loans to low- and medium-credit borrowers by the end of this year.

300 Billion KRW in Unsecured Loans to Low- and Medium-Credit Borrowers Supplied in August

According to KakaoBank on the 10th, the supply of unsecured credit loans to low- and medium-credit borrowers (KCB credit score 820 or below) was 87.6 billion KRW in June, 114 billion KRW in July, and 300.4 billion KRW in August, showing a continuous upward trend. The August figure represents an approximately 160% increase compared to the previous month.

A KakaoBank official said, “Along with the expansion of loan limits and interest rate reductions, the effect of the newly launched loan products for low- and medium-credit customers based on a new credit evaluation model in August led to an increase in loan supply.”

At the end of May, KakaoBank announced to the Financial Services Commission that it would expand the proportion of unsecured credit loans to low- and medium-credit borrowers from 10.20% at the end of last year to 20% by the end of this year.

Since then, KakaoBank formed a “Low- and Medium-Credit Customer Loan Expansion Task Force (TF)” in early June and has been promoting measures to expand loans to low- and medium-credit borrowers by applying a new credit evaluation model that combines accumulated loan data since its launch in July 2017 with telecommunications company information. The loan limit for low- and medium-credit borrowers was expanded up to 100 million KRW, and the additional interest rate was significantly lowered to enable loans at interest rates as low as the mid-3% range.

In early August, KakaoBank launched the Medium-Credit Plus Loan and Medium-Credit Emergency Loan products, which allow customers with credit scores lower than those eligible for existing medium-credit loans to also receive loans. With the launch of these products, KakaoBank said the range of eligible borrowers expanded from the 600-point range to the 500-point range based on KCB credit scores. According to the Korea Federation of Banks, the average lowest credit score for unsecured loans issued by KakaoBank was 807 points in January this year but dropped to 720 points in July.

Expansion of Eligible Borrower Range... One-Month Interest Support Event

KakaoBank plans to further expand the supply of loans to low- and medium-credit borrowers by the end of the year. Although the year-end target is 20%, as of the end of August, the proportion of loan balances to low- and medium-credit borrowers within unsecured credit loans is around 12.4%. KakaoPay expects that while it may be affected by financial authorities’ household loan volume regulations, achieving the target will not be difficult at the current loan supply pace seen in August.

KakaoBank is also expanding marketing activities to attract low- and medium-credit customers. The interest support for loans to low- and medium-credit borrowers, which has been ongoing since June, has been extended until September 9. KakaoBank supports the first month’s interest for new low- and medium-credit customers who receive ‘Medium-Credit Loan,’ ‘Medium-Credit Plus Loan,’ or ‘Saitdol Loan.’ The one-month interest is paid into the borrower’s KakaoBank account under their name.

For low- and medium-credit customers who subscribe to the ‘26-Week Savings’ plan, a promotion doubling the interest payment is running until October 9. Customers can join the 26-Week Savings after checking their credit score is below 820 by viewing their ‘My Credit Information’ on KakaoBank. Only one new account per customer is allowed.

A KakaoBank official said, “We will do our best to enhance our repayment ability assessment capabilities through CSS advancement to resolve interest rate gaps and expand loan opportunities for low- and medium-credit customers.”