Toss Bank Announces 'Hundred-Million Won Loans'... Banking Sector Says "The Key Is Number of Users"

Despite Radical Limit and Interest Rate Announcements
Banking Sector "Concentration Unlikely to Be Severe"

[Asia Economy Reporter Kiho Sung] As the launch of Toss Bank, the third internet-only bank, enters its final countdown, industry attention is focusing on it. The bank has unveiled groundbreaking deposit and loan products, signaling an aggressive marketing strategy from the outset. In particular, with financial authorities tightening regulations on household loans, the credit loan with a maximum limit of 270 million KRW is drawing even more interest. However, industry experts generally believe that, given the nature of internet banks, there will not be a sudden concentration of loans. Additionally, there is a view that the number of users will be the key factor in determining future success.

According to financial circles on the 29th, Toss Bank partially revealed its loan product lineup on its website on the 26th. There are two types: Saetdol loans and credit loans. The credit loan limit is set at a maximum of 270 million KRW with an interest rate ranging from 2.76% to 15.00% per annum. A Toss Bank official stated, "The limits and interest rates have not been finalized yet, but they are unlikely to change significantly under current conditions."

The credit loan conditions at Toss Bank are truly groundbreaking. According to the Bankers Association, the average interest rates of the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?last month ranged from 3.07% to 3.62% per annum. Internet banks Kakao Bank and K Bank also offer rates of 4.95% and 4.27% per annum, respectively. Especially in an environment where all financial institutions are drastically reducing credit loan balances, a loan limit exceeding 100 million KRW is considered highly attractive. This is why it is expected that borrowers in urgent need of loans will flock to Toss Bank. Moreover, since it is the first year of Toss Bank’s launch, it is anticipated that it may avoid the financial authorities’ total household loan volume control.

The key factor is the number of users. A banking industry insider explained, "The maximum credit loan limit is 270 million KRW, but not all customers can receive the maximum limit. Ultimately, the limit varies depending on the credit rating." He added, "Given the nature of internet banks, the performance of deposits and loans depends not only on conditions but also on the growth rate of users, so Toss Bank is expected to follow the same path."

A representative example is K Bank. Even now, K Bank offers credit loans up to 250 million KRW for salaried workers. The interest rate is at a minimum level of 2.89% per annum, and salaried employees who have been employed at the same company for more than six months and have an annualized income of over 30 million KRW can receive loans depending on their personal credit status. Additionally, K Bank operates a salaried worker overdraft loan product with a maximum limit of 150 million KRW. The interest rate is also at a minimum level of 3.39% per annum.

K Bank attracted the highest number of users in April this year, with cumulative users reaching 5.37 million, up from 3.91 million the previous month. Accordingly, deposits and loans increased by 3.42 trillion KRW and 850 billion KRW, respectively. In contrast, in August, when the user increase was lower than in April?from 6.28 million in July to 6.45 million?the deposits increased by 830 billion KRW and loans by 210 billion KRW. Although a balloon effect was expected toward K Bank, which has a high loan limit, due to financial authorities’ loan regulations at that time, the increase in deposits and loans ultimately followed the increase in users.

Another banking industry insider said, "Since Toss Bank announced that it would maintain a 34.9% share of mid-interest loans by the end of this year, it cannot increase credit loans indefinitely," adding, "In fact, the launch of Toss Bank will disperse loan demand, which could be beneficial for other banks."