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| An advertisement for mortgage loans is displayed in front of a commercial bank in Seoul, Nov. 13. Yonhap |
By Lee Min-hyung
Banks and big tech firms are intensifying their rivalry in the online loan repayment market after the government decided Monday to establish an online platform for borrowers to compare loan interest rates when they transfer loans.
According to the Financial Services Commission (FSC), the authority will set up the platform sometime around May 2023, with a view to easing borrowers' interest burden amid the steep rise of benchmark rates.
The loan repayment market has not been active in Korea, with only three major commercial banks offering repayment-focused services so far. But the FSC decided to launch the platform amid growing demand from borrowers seeking lower interest loan products at a time when the Bank of Korea has pushed for an unprecedented rapid pace of key rate hikes.
The platform will focus on comparing loan repayment interest rates from each lender, so households can easily transfer their loans from one lender to another in an effort to find the most competitive interest rates.
Previously, conventional commercial banks remained poles apart compared with big tech and fintech firms over the introduction of the new service.
Banks opposed the drive amid concerns that the FSC-created platform will end up strengthening big tech firms' market dominance. For traditional banks, their major cash cow is the loan-to-deposit margin from borrowers, but they worry about the possibility of losing their loan market share to emerging mobile-driven financial players ― such as KakaoBank and Toss ― if the platform is set up in favor of the big tech players.
However, with the authority allowing each lender to run their own loan repayment service, industry officials said the move will enhance fair competition in the industry.
"If the drive proceeds smoothly, this will help customers make reasonable decisions when transferring their loans, and the watchdog enabled both commercial lenders and big tech firms respectively to operate their loan repayment services, which we consider a fair decision," an official from a major lender said.
The financial watchdog also expected the introduction of the service to relieve borrowers' debt burdens, while at the same time boosting competition among existing lenders. About 50 financial firms ― including banks, savings banks, card and capital firms ― here have expressed their intent to participate in the drive. But insurance firms and private moneylenders did not join, according to the FSC.
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