Three internet-only banks see loans to low to mid-credit borrowers surpass 30% for five consecutive quarters… Accelerating innovation in digital inclusive finance.

Status of Inclusive Finance Achievements of Digital Banks in Q1 2025

Achievement Rate of Loan Ratio for Low to Medium Credit Borrowers Based on Balance

According to the policy implemented by financial authorities since 2021 to maintain a loan ratio of over 30% for low to medium credit borrowers in internet specialized banks, all three institutions are continuously expanding loan supply to borrowers in the lower 50% of credit scores based on KCB (Korea Credit Bureau).

Kakao Bank: Innovation in Risk Management Based on Big Data

Introduction of Alternative Credit Evaluation Model ‘Kakao Bank Score’

Kakao Bank has developed and applied an alternative credit evaluation model using approximately 37 million pieces of pseudonymized combined data from seven institutions. This has enabled precise assessments for low to medium credit borrowers and those with insufficient credit history (thin-file borrowers), who were difficult to evaluate accurately under the traditional finance information-based evaluation system.

In particular, a sector-specific specialized model has been developed for industries such as food service, service industry, special types of workers, and online sellers, expanding funding opportunities for small business owners with low personal credit despite their excellent business capabilities.

Achievement of Stability in Soundness Indicators

Despite the active supply of loans to low to medium credit borrowers, Kakao Bank’s total loan delinquency rate improved by 0.01 percentage points to 0.51% compared to the previous quarter. While achieving a loan ratio for low to medium credit borrowers that nearly doubled from 17% at the end of 2021 to 32.8%, it has also demonstrated its risk management capabilities.

Toss Bank: A Model for Digital Accessibility Innovation

Introduction of Automatic Verification Service for Small Business Owners

Toss Bank has supplied a total of 9 trillion won to 328,000 low to medium credit borrowers without any collateral loan products since its launch in October 2021. Notably, in August 2024, it became the first bank to introduce the ‘Automatic Verification Service for Small Business Owners,’ allowing users to verify their eligibility for policy fund loans from the Small Business Corporation in a one-stop manner within the app.

Recently, it launched the guaranteed loan ‘Sunshine Loan Youth’ targeted at new graduates and young entrepreneurs, contributing to alleviating the financial burden on the next generation of economic participants.

Operation of In-House Debt Adjustment Program

Toss Bank is providing various support programs to enable low to medium credit borrowers to manage their funds according to their situations and achieve self-recovery, going beyond simple loan provision. A representative stated, “We will improve customers’ access to inclusive finance based on our technological capabilities while pursuing soundness management and the value of inclusive finance simultaneously.”

K Bank: Building a Regionally Focused Inclusive Finance Ecosystem

Introduction of Credit Evaluation Model CSS 3.0 and EQUAL

K Bank recorded the highest level among internet specialized banks with a loan ratio for low to medium credit borrowers of 35%. By applying the credit evaluation model CSS 3.0, which introduced a specialized model for low to medium credit borrowers at the end of March, it has increased loan accessibility and has become the first internet specialized bank to implement the EQUAL system, enhancing alternative credit evaluation using communication data.

Additionally, it has introduced the alternative credit evaluation model ‘Naver Pay Score’ and applied big data processing technology utilizing approximately 73 million pieces of pseudonymized combined data and AI machine learning. This is expected to improve the discriminative power of the credit evaluation model by about 13.57 percentage points compared to existing credit evaluation agency models.

Cooperation Model with Regional Credit Guarantee Foundations

K Bank operates the ‘Boss Guarantee Loan’ in collaboration with credit guarantee foundations in 10 regions across the country. In the Busan region, 62% of the loan transactions in the first quarter were provided to low to medium credit borrowers, contributing to the revitalization of the local economy.

Performance and Challenges Based on New Supply Amount

Starting in 2025, as financial authorities set an additional target of over 30% based on new supply amounts in addition to the existing balance criteria, Kakao Bank (33.7%) and Toss Bank (30.4%) have met the new criteria, while K Bank (26.3%) fell short of the target based on new supply amounts.

“We have improved the performance of the credit evaluation model by utilizing various information that was not used in existing credit evaluations, and through the enhancement of CSS, we have selected high-quality customers among low to medium credit borrowers for loan provision,” said a representative from the internet specialized bank.

Economic Effects of Expanding Inclusive Finance and Future Outlook

Strengthening Support for Financially Excluded Groups

The expansion of loans for low to medium credit borrowers by internet specialized banks is contributing to increasing economic participation opportunities for groups that were previously excluded from traditional financial institutions. Kakao Bank is also working to alleviate financial burdens by offering a 0.3 percentage point interest rate discount on credit loan products for low to medium credit customers in the first quarter of this year.

Each bank is expanding the handling of policy microfinance products such as ‘Sunshine Loan Bank’ and ‘Sunshine Loan Youth’ to support credit improvement and integration into the financial sector for low-income and low-credit individuals.

Ensuring Soundness Management and Sustainability

Amid a high-interest rate environment, the fixed delinquency ratio of internet specialized banks rose from 0.61% at the end of 2022 to 0.83% at the end of 2023, making soundness indicator management an important task. Accordingly, each institution is focusing on building a sustainable inclusive finance ecosystem through precise risk management via the enhancement of alternative credit evaluation models.