three Internet Specialty Banks Top 30% Lending to Low- and Middle-Income Individuals for Fifth Consecutive Quarter, Accelerating Digital Inclusive Finance Innovation

digital Banking Inclusive Finance Performance Status in Q1 2025

percentage of loans to low- and moderate-income borrowers by balance

in line with the financial authorities’ policy of maintaining at least 30% of loans to low- and middle-income borrowers, which has been in place since 2021, all three companies have continued to expand the supply of loans to borrowers with credit scores in the bottom 50% according to the Korea Credit Bureau (KCB).

kakao Bank: Innovating big data-based risk management

introduced ‘Kakao Bank Score’, an alternative credit evaluation model

kakao Bank has developed and applied an alternative credit evaluation model that utilizes about 37 million pseudonymized data from seven organizations. this has made it possible to accurately screen low- and middle-income creditors and those with a lack of credit history (thin filers), whose creditworthiness was difficult to measure using the existing financial information-based evaluation system.

in particular, we have developed industry-specific modelsfor the food industry, hospitality industry, special type workers, and online sellers to expand financing opportunities for small businesses with strong business capabilities but low personal creditworthiness.

achieved stabilization of prudential metrics

despite aggressive supply of loans to low- and middle-income borrowers, Kakao Bank’s gross NPL ratio improved by 0.01 percentage points quarter-on-quarter to 0.51%. the bank demonstrated its risk management capabilities while nearly doubling its share of low- and middle-income loans from 17% to 32.8% at the end of 2021.

tOSBANK: A Digital Accessibility Innovation Model

introducing automated verification for small businesses

since its launch in October 2021, Toshiba Bank has provided a total of KRW 9 trillion in funding to 328,000 low- to moderate-income borrowers without collateralized loan products. In August 2024, Toshiba Bank became the first bank to introduce the Automatic Small Business Verification Service, which allows users to check their eligibility for policy loans from the Small Business Development Corporation at one stop within the app.

recently, the bank launched ‘Sunshine Loan Youth’, a guaranteed loan for first-time entrepreneurs and young entrepreneurs, to help ease the financial burden of the next generation of economically active people.

operating our own debt settlement program

beyond simply providing loans, TOSBank offers a variety of support programs to help low- and middle-income creditors manage their finances according to their circumstances and restore their self-reliance[. “We will improve customers’ access to inclusive finance based on technology and pursue prudential management and inclusive finance values at the same time,” said an official.

k-Bank: Building a localized inclusive finance ecosystem

introducing CSS 3.0 and EQUAL, a credit scoring model

at the end of March, K-Bank introduced CSS 3.0, a credit scoring model that specializes in low- and middle-income creditors, to increase loan accessibility, and introduced the EQUAL system for the first time in an internet bank to enhance alternative credit evaluation using telecommunication data.

in addition, we introduced ‘NAVER Pay Score’, an alternative credit evaluation model, and applied big data processing technology using AI machine learning and 73 million pseudonymized data. This is expected to improve the discriminating power of the credit model by about 13.57 percentage points compared to the existing credit rating agency model.

cooperation Model with Local Credit Guarantee Foundations

k-Bank operates the ‘President’s Guarantee Loan’ in collaboration with credit guarantee foundations in 10 regions across the country. in the Busan region, 62% of the loans handled in the first quarter were provided to low- and middle-income creditors, contributing to the revitalization of the local economy.

achievements and challenges based on new business volume

as the financial authorities have set a target of at least 30% of new business volume in addition to the existing balance standard from 2025, Kakao Bank (33.7%) and Tosu Bank (30.4%) met the new standard, but K-Bank (26.3%) fell short of the target in terms of new business volume.

“We have improved the performance of our credit scoring model by utilizing various information that was not available in the existing credit scoring system, and we have been able to select and provide loans to superior customers among low- and middle-income creditors through CSS enhancement.” – Official from an internet specialty bank

economic effects and future prospects of expanding inclusive finance

strengthening support for the unbanked

the expansion of lending to low- and middle-income borrowers by internet specialty banks is contributing to expanding opportunities for economic participation by groups that have been marginalized by traditional financial institutions[6]. in the first quarter of this year, Kakao Bank offered a 0.3 percentage point interest rate discount on its credit loan products for low-to-moderate credit customers to ease the burden of financial costs.

each bank is expanding the handling of policy-sensitive financial products such as ‘Sun Saloon Bank’ and ‘Sun Saloon Youth’ to help low-income and low-credit customers improve their creditworthiness and stabilize their financial lives.

prudential Management and Sustainability

amid the high interest rate environment, the management of prudential indicators has emerged as an important issue, with the fixed charge-to-income ratio of online specialty banks rising from 0.61% at the end of 2022 to 0.83% at the end of 2023. In response, each company is focusing on building a sustainable inclusive finance ecosystem by precisely managing risks through the enhancement of alternative credit evaluation models.