Internet Banks See Increase in Low-Credit Borrower Loans in Q1... Toss Bank Ranks First

[Asia Economy Reporter Song Hwajeong] The proportion of loans to middle- and low-credit borrowers by the three internet banks?KakaoBank, K Bank, and Toss Bank?increased in the first quarter. In particular, Toss Bank saw the largest increase in this proportion.

According to the Bankers Association disclosure on the 27th, the "proportion of credit loans to middle- and low-credit borrowers (based on outstanding balance)" for each internet-only bank was recorded as 19.9% for KakaoBank, 20.2% for K Bank, and 31.4% for Toss Bank. Compared to the end of last year, KakaoBank's proportion rose by 2.9 percentage points, K Bank's by 3.6 percentage points, and Toss Bank's by 7.5 percentage points.

This figure represents the share of loans to borrowers in the lower 50% credit score bracket (KCB score of 850 or below), based on personal credit evaluation company Korea Credit Bureau (KCB) standards, within the total household credit loans of each internet bank.

Financial authorities pointed out last May that internet-only banks were conducting conservative lending focused on high-credit borrowers, contrary to their original establishment purpose of expanding loan supply to middle- and low-credit groups, and urged them to increase the proportion of loans to middle- and low-credit borrowers. By the end of last year, none of the three banks had reached their initially set targets. The year-end target proportions set for this year are 25% for KakaoBank and K Bank, and 42% for Toss Bank.

Toss Bank is the only internet bank to exceed 30%. A Toss Bank official stated, "This is the second quarter since we started quarterly disclosures, and we are the only internet bank to achieve a proportion exceeding 30%," adding, "Our target for the proportion of credit loans to middle- and low-credit borrowers this year is 42%. Through company-wide efforts and system advancements, we will lead the way to ensure that middle- and low-credit customers can enjoy normal economic life and the best benefits as financial consumers within the framework of the primary financial sector."

KakaoBank said, "As of the end of April, the proportion of loans to middle- and low-credit borrowers is 20.8%," and added, "Since June last year, when we applied a new credit evaluation model, the proportion has increased by about 1 percentage point each month, so we expect to easily achieve the year-end target of 25%." KakaoBank plans to develop an alternative information credit evaluation model to improve discrimination for middle- and low-credit customers and also plans to develop a 'refinancing credit evaluation model' for customers who previously used loans from other financial companies.

K Bank also reported that as of the end of this month, the proportion of loans to middle- and low-credit borrowers has risen to 22.7%, continuing its upward trend. A K Bank official said, "In line with the founding purpose of internet banks to include financially marginalized groups, we are continuously expanding loan supply to middle- and low-credit borrowers," and added, "We will continue to provide various benefits to financially marginalized groups."