Value context and insight. lkm@koreatimes.co.kr
Internet-only banks outperform traditional peers on low rate-lending
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By Lee Kyung-min
The outstanding loans extended by Korea's two internet-only banks — Kakao Bank and Kbank — came to over 56 trillion won ($40 billion) in the first three months of this year, up near 15 trillion won from a year ago.
The increase is 2 trillion won more than the growth logged by their five traditional bank peers combined, according to market sources Tuesday.
Propelling the explosive growth in internet-mediated lending was the government-established online platform whereby borrowers can compare and switch to new loans at a lower rate.
The service was limited to unsecured loans in May last year, but has since expanded to include home mortgages and jeonse deposit loans, shaking up the 500 trillion won non-corporate credit market.
Unique to Korea, jeonse is a home renting system whereby tenants pay a lump sum refundable deposit instead of monthly rent.
According to market data, the two internet-only banks' loan balance total of 56.06 trillion won was up 14.8 trillion won, or 36 percent, from a year earlier.
The year-on-year growth in the outstanding loan for the country's five traditional commercial lenders — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — came to 12.8 trillion won.
Kakao Bank's outstanding loan balance came to 41.3 trillion won in the January to March period, up 12 trillion won from the year before.
The balance of home mortgages stood at 11.8 trillion won, up 9.4 trillion won.
Explaining the four-fold year-on-year increase are expanded scope of the houses eligible for their lending standards, as well as a spike in demand for borrowers seeking to ditch higher-charging traditional lenders, according to the internet-only lender.
Kakao said over half of the new home mortgages extended last year were used to redeem debt with the previous traditional lenders. The figure inched up to 62 percent as of March.
Similarly, some 67 percent of Kbank's apartment mortgage borrowers used the new line of credit to pay off previous loans granted by traditional lenders.
Kbank's outstanding loan balance came to 14.7 trillion won in the first quarter, up 2.82 trillion won from a year earlier.
Also robust was the deposit balance total growth of the two internet-only lenders over the past year.
The two had a combined 76.9 trillion won in deposit balance, up 20.1 trillion won from the previous year.
Behind the success of Kakao was the popularity of joint accounts whereby a group of friends and acquaintances are able to pool and use their money to equally share the expense for gatherings or trips.
Kbank was able to draw and lock in a greater number of new customers with the sales of higher interest-bearing accounts.
"Lower borrowing costs carried the strong performance of internet-only banks," an industry official said. "The latecomers have cemented their standing as a new market player, effectively undercutting the reign of top (traditional) lenders."