OntoUp Faces Industry Downturn Amid Slow Institutional Investment
Diversifies Lineup with Stock Loans and Ultra-Short-Term Products
Accelerates New Business with Credit Rating Model Supply
The online investment-linked finance industry (OnTu industry), which is facing a crisis, is turning its attention to new products and new businesses. OnTu companies, which had relied on real estate and loans to ordinary citizens, are diversifying their product portfolios and supplying their self-developed credit scoring systems (CSS) to other financial companies.
According to the financial sector on the 13th, PFC Technologies, which operates Purple Fund, the industry leader, announced the launch of a stock purchase loan (Stock Loan)-linked investment product. Stock Loan-linked investment is a product that invests in loan receivables secured by securities accounts. A corporate investment briefing session will be held on the 19th, and pre-investors will be recruited. The investment period is six months, and an annual pre-tax return of 8% can be expected.
The OnTu industry has also been releasing ultra-short-term products one after another. This is to meet the investment demand to manage funds in the short term amid economic uncertainty. Y Fund’s card sales advance payment investment product has an investment period of just one day. The yield is 12% per annum, which is higher than the general parking account interest rate of about 3% per annum. This product is structured so that the card merchant receives an advance payment secured by sales receivables, and then repays the principal and interest when the card company pays the settlement amount. Generally, the card company settles card sales to merchants 2 to 3 business days later.
PFC Technologies supplies an average of 1 billion KRW per day of card sales advance payment investment products with maturities of 1 to 5 days. The yield reaches 12% per annum. Daily Funding introduced an investment product secured by sales receivables of sellers listed on TMON, WEMAKEPRICE, and ABLY. The investment period is one month, and the yield is in the 8% range per annum.
With this diversification of investment product lineups, the proportion of real estate and household loans in the OnTu industry has significantly decreased over the past year. In May last year, real estate project financing (PF) and secured loans accounted for 70% of total loan balances, but last month it recorded 60%, down 10 percentage points. The proportion of personal credit loans also decreased by 5 percentage points from 13% in May last year to 8% last month. On the other hand, the balance of secured loans (excluding real estate) was 28% as of the end of last month. This is more than double compared to 13% in the same period last year.
Some OnTu companies have ventured into new businesses using CSS. They provide their advanced in-house CSS, based on artificial intelligence (AI) and machine learning technologies, to other financial companies and receive subscription fees. OnTu companies have devoted considerable effort to developing CSS from the early stages of their business because the core of the OnTu business structure is loan automation. Through differentiated CSS, they filter out poor borrowers and calculate reasonable loan amounts and limits.
PFC Technologies has signed supply contracts for the risk management solution ‘AirPac’ with eight financial companies including Lotte Card, Jeonbuk Bank, and SBI Savings Bank, and has completed pilot service operation and performance verification with 19 companies. They also plan to collaborate with rental companies requiring credit transactions and large fintech companies. Winkstone Partners plans to acquire a personal business credit evaluation license and establish a credit evaluation specialized subsidiary. They are also preparing to expand overseas to Southeast Asia and other regions with insufficient financial data.
The reason these OnTu companies are actively pursuing new products and new businesses is that the industry is deteriorating and facing a survival crossroads. The combined linked loan balance of the top four companies (PeopleFund, 8Percent, Together Funding, and Honest Fund) was 475.2 billion KRW as of the end of last month, down 21.6% from 606.5 billion KRW in May last year. Compared to May 2022, when the industry was booming (840.6 billion KRW), it has decreased by about half. This is due to the increased risk of PF loans caused by the real estate market slump and the continued delay in attracting domestic financial institution investments, a long-standing issue for three years. It is analyzed that if financial institution funds come in, procurement costs can be reduced while meeting the demand for personal credit loans.
An OnTu industry official said, “It is difficult to attract large-scale investments and loans due to strong regulations, but we cannot just wait for regulatory relief. We are looking for new sources of revenue.” Another official said, “If we cannot turn a profit this year, we may have to start the process of closing down next year, so we are taking a desperate stance and aggressively operating. Last year, there was almost no profit from new businesses, but we expect to receive payments in the hundreds of millions of KRW in the second half of this year.”
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