Internet-only banks conveyed to the financial authorities a view asking that in-person sales be allowed only for small and midsize enterprise loans. The financial authorities received a similar view last year and reviewed regulatory improvements, but ultimately failed to reach a conclusion. The authorities plan to discuss related regulatory improvement measures through a task force (TF), but say they will proceed cautiously.
According to the financial sector on the 9th, the financial authorities plan to form a TF and discuss development plans for internet-only banks. The TF also decided to review allowing in-person sales for SME loans at internet-only banks.
The financial authorities recently heard proposals from the internet-only banking industry, including KakaoBank, Kbank, and Toss Bank, to activate productive finance. At this meeting, internet-only banks were said to have conveyed the view that in-person sales are needed for SME loans.
In principle, internet-only banks are allowed non-face-to-face sales only, and when handling SME loans they may conduct on-site due diligence or meet with an SME representative only if it is necessary to verify whether the company is actually operating or to confirm the authenticity of documents. However, it is known that there have been no cases of on-site due diligence conducted under such exceptions. As a result, internet-only banks are focusing mainly on loans to sole proprietors rather than to small and midsize corporations.
Internet-only banks argue that non-face-to-face sales have limits in increasing SME loans and that allowing in-person sales would enable them to expand lending even to early-stage startups and small corporations.
The financial authorities also reviewed early last year a plan to partially allow internet-only banks to conduct in-person sales through business partnerships with regional banks. However, a final conclusion was not reached due to criticism that such deregulation does not align with the founding purpose of internet-only banks, which is financial and IT innovation through non-face-to-face sales. The financial authorities are reviewing a plan to indirectly allow in-person sales by having regional banks and internet-only banks jointly launch SME loans.
The financial authorities are cautious about allowing in-person sales by internet-only banks. There is considerable opposition that allowing in-person sales would erase their distinction from commercial banks. Questions have also been raised about whether internet-only banks are capable of handling SME loans, which carry a high risk of default. An official at the financial authorities said, "We will review the request from the industry and look for alternatives."