Announced Last October but... Preliminary Approval Application Still Pending
Tensions Amid Various Controversies... Strategy Under Review
[Asia Economy Reporter Minwoo Lee] The credit rating (CB) business, touted as Toss's new growth engine, is struggling to gain momentum. More than a year has passed since its announcement last year, yet it has not even applied for preliminary approval. As related strategies are being revised, it is expected to take more time.
According to industry sources on the 23rd, Toss's credit rating preparation corporation, "Toss Credit Data," has still not applied for preliminary approval from the Financial Services Commission. Since announcing its launch at the end of last year, it has been actively recruiting personnel for business development and building credit rating systems from early this year, but a launch within this year has become virtually impossible.
Initially, Toss announced plans to pursue both personal CB and personal business CB, but even that is now uncertain. It is reported that a full revision of the related strategy has begun. Previously, in November 2019, the amendment to the Act on the Use and Protection of Credit Information (Credit Information Act) divided the existing credit rating business into personal CB, personal business CB, and corporate CB. Since then, personal business CB operators have gradually emerged, but personal CB is still dominated by NICE Credit Rating and Korea Credit Bureau (KCB).
Toss ambitiously entered this "red ocean" armed with its vast accumulated financial data. The judgment was that there is a good chance of success by targeting "new filers" (those with insufficient financial transaction history) such as students, housewives, and the elderly, who are in the blind spots of credit evaluation. Toss Credit Data's credit rating models are also used in Toss Bank's loan screening, and it was expected that these models could be sold externally as well.
However, recent controversies related to personal information have led financial authorities to maintain a conservative stance, causing Toss to face difficulties. Previously, Toss's subsidiary Toss Place was embroiled in controversy for collecting information on more than 150,000 merchants without consent. Toss was also criticized for selling personal and credit information of those who applied for insurance consultations within the Toss app to insurance agencies and individual insurance planners, generating significant revenue from 2018 to August this year. At the time, Toss explained that it was not illegal as it held the qualification of a personal credit information management business (MyData). A Financial Services Commission official said, "Not only personal business CB but especially personal CB should be approached with caution."
The fact that competitors have already entered the market and are rapidly advancing their businesses also appears to be a burden. Korea Credit Information, which obtained full approval for personal business CB from the Financial Services Commission in August, counts KakaoBank as its second-largest shareholder. By positioning itself as the first dedicated personal business CB evaluator in Korea, it is expanding its credit scoring system (CSS) business for personal businesses in partnership with KakaoBank and K Bank. BC Card also obtained full approval for personal business CB in July. An industry insider said, "If Toss does not obtain preliminary approval this year, it may be difficult to launch even in the first half of next year."
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