Digital Bank Growing Personal Business Loans... Toss Bank Reaches 1.5 Trillion Won in One Year

[Asia Economy Reporter Bu Aeri] Internet-only banks are accelerating their expansion by increasing loans to individual business owners.

Toss Bank announced on the 20th that the scale of its non-face-to-face individual business owner loan, 'Toss Bank CEO Loan,' has reached 1.5 trillion KRW. Among these, the proportion of loans to low- and medium-credit borrowers accounts for about 49.8% of the total loan balance. Toss Bank introduced the 'Toss Bank CEO Loan,' the first non-face-to-face, unsecured, and collateral-free credit loan by an internet-only bank, in February last year.

According to the bank, the supply volume last month was 183 billion KRW, and one out of every four individual business owner loans among all banks operating such loans was made through Toss Bank.

Toss Bank discovered low- and medium-credit borrowers with actual income and repayment ability through its self-developed credit evaluation model (TSS), and self-employed and small business owners who were excluded from the primary financial sector moved to the secondary and tertiary financial sectors such as savings banks and capital companies.

According to Toss Bank, customers who found it difficult to get loans from commercial banks have gained new opportunities. Customers include transportation workers, warehouse workers, and mining workers who had difficulty proving income and thus obtaining loans from the primary financial sector, accounting for 4.2% of Toss Bank's customers. By industry, wholesale and retail accounted for about one in three customers (32.4%), the largest share. These were mainly so-called 'non-face-to-face individual business owners' operating online businesses. Restaurants (13.3%) and manufacturing (6.7%) followed.

A Toss Bank official said, "There is a high response to individual business owner loans, with an average of 1,644 loan applications per day," adding, "We have timely supplied funds to small business owners and self-employed people who needed urgent business funds, and we will continue to provide ongoing support."

Kakao Bank, which launched individual business owner loans in November last year, is also focusing on expanding loan products. As of the fourth quarter of last year, Kakao Bank's individual business owner loan scale was about 100 billion KRW. A Kakao Bank official said, "We have secured more than 200,000 individual business owner customers and plan to expand business with the launch of simple tax inquiry and reporting services."

In the case of K Bank, it introduced the 'CEO Loan,' a guaranteed loan for individual business owners, in partnership with the Credit Guarantee Foundation in May last year, and launched the 'CEO Hope Loan' for individual business owners in December last year. K Bank also plans to continuously increase its corporate loan portfolio.

However, managing delinquency risk remains a challenge for internet-only banks with a high proportion of loans to low- and medium-credit borrowers. Kakao Bank's delinquency rate rose by 0.27 percentage points to 0.49% at the end of last year compared to the previous year, and although K Bank's fourth-quarter results have not been disclosed, its delinquency rate was 0.67% at the end of the third quarter of last year, up 0.26 percentage points from the end of 2021. Toss Bank's delinquency rate, which was 0.04% in the first quarter of last year, was about 0.3% as of the third quarter of last year.