Internet Banks Expand Corporate Lending Through Partnerships with Regional Banks

Starting next year, internet-only banks will introduce joint corporate lending with regional banks, prompting these banks to begin hiring and system development in earnest. With household loan regulations stifling growth in lending, the focus is on whether corporate finance can become a new revenue source.

According to the financial sector on July 21, Kakao Bank has recently begun hiring for a corporate lending product and system planning manager. This follows the Financial Services Commission designating Kakao Bank and BNK Busan Bank's joint lending service as an innovative financial service on July 15, allowing them to commence product development and system design.

A Kakao Bank official stated, "We are hiring to prepare for the launch of joint lending for small and medium-sized enterprises next year," adding that they plan to unveil the service after negotiating terms and developing products with Busan Bank.

Currently, corporate lending from Kakao Bank, Toss Bank, and K-Bank is primarily focused on credit loans and guarantee loans for individual business owners, as well as real estate-backed loans for individual entrepreneurs. Internet banks, which operate primarily online, have faced limitations in expanding into corporate loans that require in-person procedures such as site inspections, collateral verification, and management interviews.

However, starting next year, the allowance of some in-person assessments for corporate loans by internet banks and the introduction of joint corporate lending with regional banks will provide a foundation for expanding corporate finance to small and medium-sized enterprises and general corporations.

Joint corporate lending involves internet banks with digital platform competitiveness collaborating with regional banks that have extensive experience in corporate loan assessments. This initiative has been continuously requested by internet banks seeking to secure new revenue sources amid restrictions on household loan growth.

There is also a growing need to diversify the current corporate lending structure, which is heavily skewed towards individual business loans. An increase in delinquency rates among self-employed individuals due to economic slowdown could raise the overall credit risk in corporate lending. In fact, in the first quarter of this year, the delinquency rates for corporate loans at Kakao Bank and Toss Bank were 1.4% and 2.11%, respectively, significantly higher than the average of about 0.4% among the five major commercial banks.

Other internet banks are also hastening their expansion into corporate finance. Toss Bank is preparing to launch joint corporate lending with Gwangju Bank, while K-Bank is developing a corporate lending system aimed at small and medium-sized enterprises to establish a non-face-to-face lending service.

An industry official noted, "In a situation where household loan regulations continue, it is important to broaden the business base through corporate loans. By collaborating with regional banks to identify promising local businesses, we can expect to alleviate funding shortages in the region."