On June 11, Kakao Bank announced it has provided an additional 1.2 trillion won in loans for individuals with mid to low credit ratings using this alternative credit assessment model.
In the second half of 2022, Kakao Bank became the first in the industry to establish its unique credit scoring model, the 'Kakao Bank Score,' by utilizing pseudonymized combined data from the Kakao community, Lotte Members, Kyobo Bookstore, and the Financial Settlement Institute. This model has been applied in credit loan evaluations, enhancing the ability to assess individuals with mid to low credit ratings and 'thin files' (those with insufficient financial history).
In the area of loans for small business owners, Kakao Bank is operating a specialized credit assessment model that uses business location information. This model is aimed at improving the accuracy of credit assessments for borrowers in sectors like food service and online selling, where traditional evaluation methods have struggled.
According to Kakao Bank, since the introduction of the alternative credit assessment model in 2023, about 12% of mid to low credit loans processed were previously rejected under the old model but were approved through the new assessment based on alternative information. Thanks to the performance of this model, the total amount of mid to low credit loans issued by Kakao Bank has exceeded 16 trillion won since its launch in July 2017.
Kakao Bank is also working to expand the use of its alternative credit assessment model externally. After signing a business agreement with NICE Information Service in June of last year, it began providing alternative credit assessment scores to some savings banks and capital companies this year.
Kakao Bank anticipates that more than ten financial institutions will adopt this model for loan evaluations within the year. The goal is to broaden credit assessment opportunities for underserved financial groups through the expansion of the alternative credit assessment model.
A Kakao Bank representative stated, "The expansion of the alternative credit assessment model will be key to establishing a fairer and more sophisticated credit evaluation system for consumers who have been marginalized by traditional credit assessment systems. We will continue our efforts toward innovation in credit assessment models and spread this throughout the financial sector to ensure more customers benefit from a new form of inclusive finance."
* This article has been translated by AI.
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