Internet banks, which find it difficult to increase household loans such as personal loans and housing secured loans, are turning their attention to the personal business loan market, sized at 455 trillion won. Growth has stagnated due to the financial authorities' tightening stance on household loan management, and attention is focused on whether internet banks can create a "catfish effect" in the personal business loan market using convenience and competitive interest rates as their weapons.
On the 9th, according to the financial sector, KakaoBank will launch 'credit loans over 100 million won' and 'non-face-to-face collateral loans' for personal businesses this year. Currently, guarantee loans account for more than half of the total personal business loans, and expanding the product lineup to increase market coverage—an indicator of how many products or services a financial institution offers to a specific market or customer segment—is KakaoBank's goal. As of the end of last March, KakaoBank's market coverage in personal business loans was 12%, and it plans to raise this to 45% by the end of this year.
Kbank took the lead in targeting the market by launching 'CEO real estate secured loans,' a non-face-to-face collateral loan product for personal businesses, in August of last year. The CEO real estate secured loan provides up to 1 billion won, with a limit of 85% of the apartment market price. The interest rate is at the lowest level in the industry. The average interest rate for new personal business collateral loans handled by Kbank from January to March of this year was 3.73%, which is more than 1 percentage point lower than the average interest rate of the five major commercial banks (4.37% to 5.04%). This product became very popular, surpassing a balance of 200 billion won just eight months after its launch.
Toss Bank, the leader in the personal business loan market, has stood out in the market early on. According to the Financial Supervisory Service (FSS), as of late 2022, the loan balance for personal businesses was highest at Toss Bank with 1.3099 trillion won, while KakaoBank and Kbank had only 90.1 billion won and 95.1 billion won, respectively. However, as of the end of last year, the rankings reversed, with KakaoBank recording a loan balance of 1.8946 trillion won, taking the top spot. Toss Bank plans to introduce loan products and services targeting corporate clients beyond personal businesses.
The internet banks are increasing personal business loans to diversify their business structure. While commercial banks can increase corporate loans when household loans are restricted, internet banks are in a situation where they rely heavily on individual customer loans, making them inevitably struck and urgently needing to adjust strategies. Additionally, it seems that the financial authorities' emphasis on providing financial support to small businesses and self-employed individuals also influenced this move.
The key issue is soundness management. Due to the nature of personal business owners who have uncertain incomes, the delinquency rate is inevitably higher compared to other borrowers. Internet banks, which must keep the proportion of medium to low credit loans above 30% of the total, are already in a high delinquency state. As of the end of last year, the delinquency rate for internet banks was 0.67%, exceeding the delinquency rate of domestic banks (0.44%). An official from the internet bank noted, "We plan to enhance our internal credit evaluation model (CSS) and strengthen our guaranteed loan lineup to manage the delinquency rate."