INTERVIEW Fintech CEO strives to transform home rental culture in Korea

According to the housing platform Station 3, the average monthly rent for studio apartments in the vicinity of major universities in Seoul was 590,000 ($449.18) won in 2023, in addition to a deposit of 10 million won.

The purpose of collecting a security deposit is to safeguard landlords against missed rent payments and to cover repair costs for damages that might occur. But even considering these hypothetical situations, the amount seems excessive, especially for those with limited financial resources.

For those with ample financial resources, opting for a higher deposit in exchange for a reduced monthly rent can be beneficial. In contrast, for those with limited financial means, such as young adults who have just started living independently, accumulating a large deposit can be quite challenging.

"As I visit other countries, typically, the security deposit is equivalent to about one to two months of rent. Why does Korea require a deposit almost equivalent to about 20 months of rent? Why do we have a different system? That's how we started our service," Kim Jun-young, co-CEO of the KRG Group, told The Korea Times.

Founded in 2020, its service, "Guaranteez," ensures the stable payment of monthly rent in housing contracts. It screens tenants utilizing both financial and non-financial data to verify their ability to make payments, and makes the monthly rent payments to the landlord on behalf of the screened tenants, even if they did not make the payment to KRG Group.

Foreign nationals can also apply for the service if they have one Korean national as a co-tenant.

This process is managed in cooperation with Seoul Guarantee Insurance which guarantees these contracts into the future even if KRG Group ceases to exist as a corporate entity.

"This can be a win-win situation for both tenants and landlords," Kim said. "For landlords, the strategy of lowering the security deposit and increasing the monthly rent is more profitable than depositing a large sum in a bank. Similarly, for tenants, it's more advantageous to pay a slightly higher monthly rent than to take out a loan for a substantial deposit like 10 million won."

Kim said that as a result, landlords have collected a security deposit equivalent to one to two months' rent in 95 percent of the agreements. KRG Group receives a commission for these contracts.

"It's generally okay when the security deposit is returned properly. However, there has been an increase in incidents related to security deposit violations. As a result, additional measures to ensure the return of the deposit are often required, leading to higher social costs," Kim said.

This isn't the first startup where Kim has spearheaded growth. His first startup was Nitpick, which collected and analyzed even the smallest and seemingly insignificant public complaints, turning this stacked data into a saleable product.

"By establishing a business, my wish is to make a social impact and change the culture rather than merely making profits," Kim said. "Therefore, the mission of this group is to transform the monthly rental system and culture in Korea."

Even though the monthly rental market is showing an upturn following the recent shocking jeonse fraud incidents, he believes that overcoming public perception is still a significant hurdle. As this type of service is not prevalent in Korea, many people, especially parents, call the company to check whether it is legitimate.

"Many people living in monthly rental housing are socially vulnerable. I see other players entering into this market. So I hope for the entire market to grow and for the current system to change to better support the vulnerable," Kim said.