Three Major Internet Banks, 6 Trillion KRW in Medium-Low Credit Loans... 2.3 Trillion KRW Increase in 6 Months

As of June, Internet Banks' Loans to Medium and Low Credit Borrowers Total 5.9274 Trillion Won
Approximately 2.3 Trillion Won Increase Compared to End of Last Year

[Asia Economy Reporter Sim Nayoung] As of the end of June, the loan amount to low- and medium-credit borrowers by the three internet banks reached 6 trillion KRW. While household loans at commercial banks are on the decline, internet banks have been increasing household loans by about 1 to 1.5 trillion KRW every month. They have also focused on raising the proportion of low- and medium-credit borrowers in total household loans, resulting in a rapid surge in the total loan amount to these borrowers within a short period.

According to the "Status of Internet Banks' Low- and Medium-Credit Borrowers' Credit Loans" (as of June) received by Kim Sung-joo, a member of the National Assembly's Political Affairs Committee from the Financial Supervisory Service, the three domestic internet banks recorded a total of 5.9274 trillion KRW. KakaoBank had the largest amount at 2.9583 trillion KRW, followed by K Bank with 1.6353 trillion KRW.

Toss Bank recorded the smallest amount at 1.3338 trillion KRW, but considering it launched most recently in October last year among the three, it has rapidly expanded its scale. Regarding the proportion of low- and medium-credit borrowers in total household credit loans, KakaoBank was 22.2%, K Bank 24.0%, and Toss Bank 36.3%.

Internet banks aim to serve as a so-called "1.5 financial sector," embracing low- and medium-credit borrowers who find it difficult to get loans from first-tier financial institutions and have to borrow at much higher interest rates from second-tier institutions. Nevertheless, until last year, they were negligent in lending to low- and medium-credit borrowers due to concerns about soundness, and were warned by financial authorities.

Until the end of last year, the loan amount to low- and medium-credit borrowers by the three internet banks was 3.5628 trillion KRW (KakaoBank 2.4643 trillion KRW, K Bank 972.5 billion KRW, Toss Bank 126 billion KRW). In just six months, the loan amount to these borrowers by the three banks increased by about 2.3 trillion KRW.

A senior official from the Financial Services Commission said, "The proportion of loans to low- and medium-credit borrowers must be significantly higher in internet banks than in commercial banks for their existence to be justified." Compared to NH Nonghyup Bank, which had the highest proportion of loans to low- and medium-credit borrowers among the five major banks at 19.4% as of the end of June, all three internet banks have at least passed the mark.

Internet banks have introduced credit evaluation models that utilize alternative information, such as inferring consumption tendencies from card usage history and estimating employment status from bank account transaction history, rather than relying solely on credit scores. They compete in lending by selecting those among low- and medium-credit borrowers who are more likely to repay and then offering reasonable interest rates and loan amounts. A representative from an internet bank said, "The credit scoring system (CSS) is the core competitiveness of each internet bank and the reason for our investments."

The target loan proportion to low- and medium-credit borrowers by the end of this year is 25% for both KakaoBank and K Bank, and 42% for Toss Bank.