Starting next year, internet-only banks are set to launch joint corporate loans with regional banks, while restrictions on in-person reviews for corporate lending are being partially lifted — raising hopes that the sector could find a new engine of growth. Expectations are also growing that expanding corporate lending could help revitalize regional finance for small and medium-sized enterprises and small business owners.
Under the joint lending model, customers apply through an internet bank's app, with the two banks dividing responsibility for screening and funding. The internet bank handles the non-face-to-face channel and automated underwriting, while the regional bank conducts qualitative assessments such as interviews with business representatives and on-site inspections. Loan funds are split evenly, 50-50, between the two banks.
Both sides can leverage their respective strengths in the arrangement, making it widely regarded as an optimal structure for a win-win outcome. If joint lending takes off, small businesses and self-employed operators in regional areas are expected to find it significantly easier to secure financing. Customers would be able to handle everything from loan applications to principal and interest payments through the internet bank's app, without visiting a branch.
Because the two banks share the risk, the arrangement also allows customers who might have been turned down by a regional bank acting alone to be accommodated. A particular advantage is that blending in funds from internet banks — which have lower funding costs — brings down the overall loan interest rate.
The government has signaled strong support for the initiative. Financial Services Commission Chairman Lee Eok-won, speaking Thursday at a meeting on inclusive finance and regional banking held at the North Jeolla Province Small and Medium Venture Business Agency in Jeonju, said "for regional economies to recover, funds must flow smoothly to local SMEs and small business owners," and pledged to "actively support the launch of joint regional bank–internet bank loan products next year." Lee added that the joint products would be offered at interest rates at least 0.3 percentage points below those of existing standalone regional bank products.
Earlier joint household lending between internet banks and regional banks delivered rates averaging 2.1 to 2.2 percentage points lower than standalone loans, substantially reducing borrowers' interest burden — and there is keen interest in whether corporate lending will produce a similar effect.
Kakao Bank and Busan Bank are the first internet bank pairing to bring a joint corporate loan to market. The two banks, which signed an MOU in April, plan to formally launch their joint loan product for SMEs and individual business owners next year, following system development and a pilot run.
The collaboration is expected to transplant regional banks' long-standing corporate lending expertise into the internet banking model. BNK Busan Bank's corporate finance credentials are formidable: as of the end of the first quarter this year, SME loans accounted for more than half — 35 trillion won — of its total loan balance of 62 trillion won ($41.5 billion). A comparison of SME loan ratios across the industry underscores Busan Bank's dominance: SME loans make up 56 percent of Busan Bank's total lending, compared with 45 percent at Hana Bank, 44 percent at Shinhan Bank, 40 percent at KB Kookmin Bank, and 37 percent each at Woori Bank and Jeonbuk Bank.
Financial access for regional SMEs and individual business operators is also expected to improve markedly. According to National Tax Service business registration data as of Wednesday, Busan has approximately 600,000 registered individual business operators — the third highest in the country after Seoul and Gyeonggi Province. The service will not be limited to Busan-area customers, however. "Since we recruit new customers through the Kakao Bank app, we plan to operate the service nationwide rather than confining it to Busan," a Kakao Bank official said.
Expectations for internet banks' expanded role in corporate finance have also been building following the recent partial lifting of restrictions on in-person operations. The Financial Services Commission has maintained the non-face-to-face principle as the default but opened a path for internet banks to handle in-person transactions — after prior notification — for a defined list of cases involving user protection and similar concerns.
The specific exceptions the FSC identified include processing special early-termination requests arising from the launch of a youth savings product, debt-restructuring support, and expansion of joint regional bank loans to local SMEs and individual business operators. The provision allowing internet banks to smoothly carry out procedures required during corporate loan screening is seen as particularly significant. The internet banking industry expects that allowing in-person operations will resolve procedural hurdles such as document verification more flexibly, substantially improving overall consumer convenience.
Experts agree, however, that as internet banks expand into SME lending, they must demonstrate their own technological innovation — not merely rely on cooperation with regional banks.
Kim Sang-bong, an economics professor at Hansung University, said "corporate lending requires not only a review of financial statements but also very rigorous due diligence from a technology-finance perspective — and since internet banks currently lack the specialized personnel for that, cooperation with regional banks is essential."
Ahn Dong-hyun, an economics professor at Seoul National University, said "existing banks tend to focus on stable lending centered on large corporations," and advised that "internet banks should leverage their strength in technology even in the lending space, moving toward genuinely supporting SMEs and small business owners with low credit scores."
won@heraldcorp.com
