Three internet banks will jointly launch co-lending products in collaboration with local banks this year, engaging in direct competition. However, it is expected that products with tangible benefits for consumers will not emerge competitively. Given that the three internet banks are competing for a limited pie, it seems unlikely to create a significant impact.
According to the financial sector on the 7th, the Financial Services Commission designated the joint lending service of KakaoBank and Jeonbuk Bank as an innovative financial service. KakaoBank stated it will release an actual product in the second half of this year. Kbank is also developing a joint lending product with BNK Busan Bank, aiming to launch it within the year, and has recently applied for innovative financial services. Toss Bank is already a market leader, having introduced the product with Gwangju Bank last August. Moreover, Toss Bank plans to unveil a follow-up joint lending product in partnership with the commercial bank iM Bank (formerly Daegu Bank). The three internet banks will clash over the same type of service, joint lending, this year.
However, even if a competitive environment for joint lending is created, the benefits consumers feel are expected to be minimal. In the current business environment, it is difficult for the three internet banks to engage in a competition of benefits. Currently, joint lending products are limited to non-face-to-face credit loans. To gain a competitive advantage in a limited market, banks must relax interest rates and lending limits. However, in a situation where financial authorities are strictly managing the increase in household loans, designing products to focus lending demand is nearly impossible. An official from an internet bank noted, "It is hard to operate aggressively enough to exceed household loan management guidelines."
As the growth potential of the market is clearly limited, there are constraints on the profit scale afforded to internet banks. The three internet banks must share a single pie. Furthermore, joint lending generates less interest income compared to existing loans. The funding for joint loans is equally burdened by the internet banks and partner banks. Since the product is created from the coffers of both banks, the interest from loans is also shared between the internet banks and partner banks. While competition is occurring among the three internet banks for a single pie, in reality, six banks are sharing the profit.
Internet banks are anticipating benefits in customer acquisition through joint lending. From the perspective of internet banks, joint lending is a means to acquire more customers with less financial input. While the burden of funding for loans is shared with partner banks, the derivative effects from customer influx are solely the internet banks' responsibility. Another official from an internet bank hinted, "Loan customers tend to visit the application frequently, making it possible to cross-sell savings and deposits products to them."
☞ What is a joint lending product?
A lending product presented by internet banks in collaboration with partner banks. Joint lending is similar in appearance to regular loans in that consumers apply for loans and borrow money through the internet bank app. However, it differentiates itself from regular loans in that the internet banks and partner banks jointly secure the loan funds and each conducts customer reviews. The interest earned from the loans is shared between the internet banks and partner banks.