Mobile lenders tap into business loans market

A receptionist is seen working at the entrance of Toss Bank, one of the country's three mobile-only lenders, at its headquarters in southern Seoul, in this photo taken in October 2021. Toss Bank was the first among three online lenders to introduce business loan services, Feb. 14. Korea Times file

By Yi Whan-woo

Mobile-only banks, which have mostly relied on credit loans, are advancing to the market for business loans in an effort to diversify revenue streams. The efforts come as the government commits to curbing the snowballing household debt with toughened loan regulations.

Toss Bank was the first among the three online lenders, including KakaoBank and K Bank, to launch loan services, Feb. 14, for business owners with a floating interest rate in the low- to mid-3 percent range.

In announcement on Feb. 15, KakaoBank said it will introduce the so-called small office/home office loans (SOHO) in the second half of the year.

The SOHO, according to the banking arm of tech giant Kakao, is aimed at supporting cash-strapped small business owners, including those working from home or renting a small office space, who have low credit scores and are having difficulty in securing loans.

K Bank plans to launch a lending program in the first half of the year in cooperation with the Korea Federation of Credit Guarantee Foundation, a non-profit organization serving as a guarantor for small business owners who lack collateral.

The bank will come up with a program that allows the targeted customers to borrow money for essential expenses needed for running a business, such as buying raw materials and paying wages.

Other than business loans, KakaoBank is additionally scheduled to launch a mobile mortgage loan service, Feb. 22, generating up to some 630 million won ($526,000) in loans with the interest rate ranging from 2.99 percent to 3.93 percent.

For a user-friendly and convenient loan application process, the service will be powered by an artificial intelligence (AI)-based chatbot that can inform customers of the expected interest rates and the maximum amount they can borrow in just three minutes.

Market observers view business loans and mobile mortgage loan services as being “a key variable to decide” internet-only lenders' growth this year.

An industry source viewed the strategy of a diversified portfolio as something that can benefit customers, as it will prompt major commercial banks to revise their interest rates and other factors so as to improve their market competence.

The sources speculated that advancing into overseas markets could be an option to improve profitability due to tightened regulations.

They point out that KakaoBank on Feb. 15 noted its contactless service based on mobile technology as its “biggest asset” and that it wants to show prowess outside Korea as well.