Many Requests for Interest Rate Reduction Rights Submitted to K-Bank and T-Bank
Easy Application and Document Submission... Convenience Higher Compared to Commercial Banks
[Asia Economy Reporter Minwoo Lee] #A in their 30s recently received a promotion, leading to a noticeable increase in income. With more financial leeway, they decided to request an interest rate reduction on an existing loan from a commercial bank. Although they managed to find and apply for it through a mobile application (app), that was not the end. A few days later, they received a phone call instructing them to check their email and submit various documents. Concerned about sending sensitive income verification documents via simple email, they repeatedly tried to inquire through the provided phone number but could not get through. Even when they asked the customer center whether the email address was official, the confirmation was not timely. Only after several repetitions of this process could they confirm that the interest rate reduction request was officially ‘applied for.’
Regarding the right to request an interest rate reduction, which can be exercised based on employment, promotion, asset increase, or credit rating improvement after signing a loan contract, there is a significant difference in convenience between internet-only banks and traditional commercial banks. Although all claim that applications can be made easily via mobile, commercial banks only allow ‘application’ but still require the cumbersome submission of documents in person. In contrast, internet banks handle everything from application to approval in a ‘one-stop’ process, earning strong user approval.
According to data received on the 30th from the financial industry and the office of Representative Heegon Kim of the People Power Party from the Financial Supervisory Service, KakaoBank accepted 139,159 interest rate reduction requests last year. This is three times the number accepted by Shinhan Bank (43,071), the highest among the four major commercial banks (KB Kookmin, Shinhan, Hana, Woori). It also accounts for more than half of the total 254,285 accepted requests among the 10 surveyed commercial banks (KB Kookmin, Shinhan, Woori, Hana, SC, Citi, NH Nonghyup, Industrial Bank, K Bank, KakaoBank).
KakaoBank’s acceptance rate for interest rate reduction requests was 25.7%, slightly below the average of 28.4% for the 10 commercial banks, which is interpreted as a result of the ease of application. Last year, KakaoBank received a total of 541,507 requests, three times the combined total of 171,933 from the four major commercial banks (KB Kookmin 20,573; Shinhan 129,398; Hana 4,987; Woori 16,975). Because commercial banks required applicants to submit various documents even after applying via mobile app, the entry ‘threshold’ was relatively high. Internet banks do not require separate document submissions once applied. Various income verification documents are automatically obtained by internet banks from the National Health Insurance Service.
Loan customers of Toss Bank, which officially resumed household lending this year, have also clearly experienced this effect. As of the 11th of this year, the acceptance rate of interest rate reduction requests among medium- to low-credit customers was 32.8%. Among those who applied for new loans, about one in five (18.2%) had their interest rates lowered within a week. Most customers who received rate reductions saw their credit ratings improve by 2 to 3 grades. They improved their creditworthiness by repaying second- and third-tier financial loans such as cash advances or card loans after borrowing from Toss Bank.
Unlike commercial banks, which are not proactive in accepting interest rate reduction requests, Toss Bank even proactively informed customers first. After Toss Bank notified customers that they could exercise their right to request an interest rate reduction due to promotion, job change, or credit score improvement, 37.5% of customers who received approval for interest rate reduction requests became aware and benefited from the rate reduction. A financial industry official explained, "While a high acceptance of interest rate reduction requests may reduce the short-term interest margin, in the long term, it can have a positive effect by firmly securing high-quality and loyal customers."
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