The long-rumored investment linkage service between savings banks and the online investment-linked financial industry (P2P) has been launched. The savings bank and P2P investment linkage is expected to expand loan opportunities for financially disadvantaged groups and lower the interest rates of related financial products compared to existing products.
According to the financial sector on the 29th, the top company in the P2P industry, PFCT, began selling credit loan products for mid- to low-credit borrowers by raising investment funds from savings banks the previous morning. The investment funds are expected to be raised from Daol Savings Bank, Korea Savings Bank, Smart Savings Bank, and Selam Savings Bank, with plans to expand the number of participating savings banks to 29 depending on the application trend.
On the 26th, HonestAI launched the 'Honest Fund,' a Banking-as-a-Service (BaaS) model based on institutional linkage investment in the P2P industry. When financial institutions deposit investment funds, loans are executed for borrowers at the most reasonable interest rates and limits through an AI lending platform, funded by savings banks. Eight Percent, MoneyMove, and Mowda are also expected to begin linkage investment services in the near future.
The savings bank and P2P investment linkage is a financial service in which savings banks supply the funds needed for credit loans solicited by P2P companies from financial consumers. When financial consumers apply for loans with P2P companies, the companies assess the loans using their respective credit evaluation models (CSS) and provide information about the consumers to the savings banks. After that, the savings banks make loan decisions and transfer the investment funds to the P2P companies to execute the loans.
Since being designated as an innovative financial service by the Financial Services Commission on July 24 last year, collaborating with interested companies and relevant organizations has been driving service development. Starting early this year, the Korea Savings Bank Association has been establishing an IT system for linkage investment, aiming to launch the service in the first quarter; however, the recent product release was delayed due to prolonged service inspections by individual savings banks.
Savings bank linkage investment has been a long-standing goal for the P2P industry. P2P refers to financial services that directly connect investors and financial consumers via an online platform to facilitate transactions. Through the platform, investors can invest in various loan products, while financial consumers can raise the necessary funds using a P2P method without going through traditional banks or financial institutions.
However, due to a lack of trust in the P2P industry, stable funding has been difficult, leading to stagnation in growth. According to the Korea Financial Technology Association (KFTC), as of the end of last month, the outstanding loan balance of 49 P2P companies was 1.1479 trillion won. The loan balance was 1.106 trillion won at the end of last year and is projected to be 1.1189 trillion won at the end of 2023, failing to break out of the 1 trillion won range, indicating that existing investments are merely circulating in the market without new investor inflow.
However, with savings banks taking on the role of funding sources, the situation may reverse. P2P companies can secure funding stability and enhance their creditworthiness and market trust. Additionally, by applying actual financial institutions' due diligence and evaluation standards, risk management can be improved, and institutions like savings banks can play an important role in responding to financial regulations and expanding the market.
This also has positive implications for financial consumers. If the funding base of P2P companies diversifies, competition in interest rates will be stimulated, enabling them to offer lower rates to consumers. In fact, the interest rates for the credit loan products targeting mid- to low-credit borrowers in the P2P and savings bank sectors are between 13% and 14%, which is lower than the typical rate of approximately 18% for mid- to low-credit loans. As opportunities for loans increase for previously underbanked groups like mid-credit borrowers and freelancers, access to finance improves.
Savings banks can benefit by diversifying their loan assets. By securing a new loan portfolio, they can diversify their revenue models, and through their linkage with P2P platforms, they can expect to enhance their non-face-to-face operational capabilities based on data. A representative from the P2P industry noted, "Having started the service late, we thoroughly checked the systems, and we hope that this savings bank linkage investment will expand to include cards and insurance in the non-bank financial sector."