Online P2P lenders seek looser investment caps as cumulative loans near 20 trillion won

Online investment-linked finance firms, known as on-tu-eop, are calling for deregulation — including higher investment caps for retail investors — to improve profitability and expand inclusive finance. With cumulative lending nearing 20 trillion won, the sector is increasingly seen as an alternative source of credit, drawing attention to whether talks on easing rules will gain momentum.

According to the financial industry, the sector held a policy forum at the National Assembly on March 26 under the theme of measures to revitalize online investment-linked finance.

The business connects investors and borrowers through online platforms. Investors participate in loans and earn returns through claims to principal and interest. After the relevant law took effect in 2020, the sector was brought into the regulated financial system. Recently, through linked investments with savings banks, firms have supplied midrate credit loans averaging in the 12% range to borrowers in the bottom 50% of personal credit scores, serving as a channel for working-class lending.

At the forum, participants highlighted the need to broaden institutional investor participation and raise investment limits for individuals. Institutional investors are currently capped at 40% of investment per loan. The limit for general retail investors is 40 million won, while products tied to real estate-collateralized loans are capped at 20 million won.

Lee Hyo-jin, CEO of 8percent, said the sector differs from traditional banks because it relies on transaction fees rather than net interest margins, meaning higher volume directly supports growth. “If we expand transaction volume through easing investment regulations, a virtuous cycle is possible — more funding supply, lower rates and stronger demand,” Lee said. He added that improving the operating environment is needed to meet policy goals such as spreading inclusive finance and supporting financial innovation.

Speakers also called for expanding the scope of loans eligible for linked investment by lending institutions. Lee Jung-min, an attorney at Kim & Chang, said linked-investment products are currently limited to personal credit loans where risk can be managed. “Given the purpose of the On-tu Act to supply midrate financing to blind spots in lending, the scope should be expanded to include loans to sole proprietors, where funding demand is high,” he said. Other proposals included easing limits on on-tu firms’ own-capital investments and restructuring investment frameworks.

Financial authorities and some experts urged caution. Jeong Seon-in, director of digital finance at the Financial Services Commission, said investment risks can emerge years later, requiring a careful approach. “Efforts to strengthen qualitative management and build trust must go hand in hand,” Jeong said. Seo Byeong-ho, head of the Financial Innovation Research Division at the Korea Institute of Finance, noted that deregulation such as raising minimum capital requirements was implemented in 2022 and 2023, and said the focus now should be on boosting trust, including stronger disclosure.