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THE INVESTOR
November 27, 2021

Market Now

Online-only lender Toss Bank commences operation

  • PUBLISHED :October 05, 2021 - 10:22
  • UPDATED :October 05, 2021 - 10:22
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Lee Seung-gun, founder and CEO of Viva Republica (Yonhap)

The country’s third internet-only lender, Toss Bank, was slated to begin operation Oct. 5, heating up the competition in the fast-growing online banking market, according to industry sources Oct. 4.

The lender, controlled by Viva Republica, the operator of fintech app Toss, was to start offering its banking services -- including credit loans, savings and deposits -- with a primary focus on expanding midrange interest loans.

In June, when the online bank received final approval from the Financial Services Commission, the lender vowed to extend more than 30 percent of its credit loans to borrowers with low to moderate credit scores by the end of this year. Many borrowers with low to moderate credit scores are young people or small-business owners.

The country’s first and second online lenders -- K bank and Kakao Bank, both established in 2016 with a mission to offer midrange interest products -- also announced that they would expand the proportion of such products. K bank’s new target is 20.8 percent of all loans, and Kakao Bank’s is 21.5 percent.

Ahead of its launch, Toss Bank set its minimum interest rate on credit loans at 2.76 percent per year, the lowest among commercial banks. Interest charged on credit loans by major commercial banks here has hovered between 3 and 4 percent on average in recent months.

A growing number of borrowers are likely to flock to Toss Bank for the time being as commercial banks have tightened rules on personal loans, having come under pressure from financial authorities seeking to rein in the nation’s snowballing household debt, industry sources said.

The regulator earlier this year urged local banks to limit the annual growth of their loans to 5 percent, but this target does not apply to online-only lenders. In keeping with the authority’s suggestion to keep personal credit loans below an individual borrower’s annual earnings, however, the new online bank has set a limit of 270 million won ($228,420). The limit for credit loans via overdraft accounts at Toss Bank will be around 100 million won.

By Choi Jae-hee (cjh@heraldcorp.com)

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