Korea

Four regional banks are particularly at risk of asset-quality deterioration.

More than half of Korea’s 1,600 bank branches no longer accept cash deposits or withdrawals.

Asset quality remains stable.

Fintech companies will stay focused on money transfers and other simple transaction services.

They stand to benefit from expansions and from the low-rate policy environment.

In the first half of the year ended June 31, kakaobank hauled net income of KRW10b ($8.58m), booking net profit for the first time following a protracted loss-making period.

By 2020, cards will emerge as the dominant payment instrument.

Internet-only banks drove robust adoption.

The number of transactions broke the 100-million mark for the first time.

The two players only account for 0.6% of the loan market in Q1.

It offers evaluation of personal loans without having to submit hard copy of documents.

It will allow individuals to store key personal information needed for online transactions.

Rejected applicants Toss Bank and Kiwoom Securities are welcome to re-apply.

ROAA is still relatively low at -0.9% in December 2018.

The number fell from as high as over 7,500 in 2014.

Lenders grapple with low profitability and limited capital two years since they kicked off. After two years since their debut, Korean virtual lenders Kakao Bank and K Bank have managed to capture just 0.6% of the KRW-denominated loans market as of end 2018, according to a report by Moody’s with data from the Financial Supervisory Service (FSS). The lenders have been the most active in the unsecured personal loan market with plans to extend to retail loan segments like mortgages. “Korea’s two virtual banks have brought modest competition in some retail loan segments but no broad disruption in the two years they have been operating,” the report said. To jockey for market share, the ratings agency noted that K bank has a loan portfolio geared toward non-prime borrowers or individuals with credit rating less than four out of 10, pushing its delinquency rate above the regional banks. Meanwhile, Kakao Bank, with a higher portion of prime borrowers, has shown better asset quality compared to its commercial bank peers. Kakao Bank has focused its lending business on prime borrowers, and its proportion of loans with lending rates of less than 4% was at around 82% of total newly extended loans in May 2019. “Virtual banks have not yet shown competitive advantages in using proprietary data sources for underwriting. We expect asset quality of the virtual banks will reflect on the risk undertaken in terms of the proportion of high risk borrowers,” Moody’s said.