South Korea's three internet-only banks - KakaoBank, K Bank and Toss Bank - expanded lending to mid-to-low credit borrowers in the first quarter, stepping up support for financially vulnerable groups. All three maintained their role in inclusive finance, with the share of lending to mid-to-low credit borrowers exceeding financial authorities' targets.

On May 22, the companies said KakaoBank's share of outstanding loans to mid-to-low credit borrowers was 32.3 percent in the first quarter, while the share of new lending was 45.6 percent. That exceeds the targets set by financial authorities of 30 percent and 32 percent, respectively.

KakaoBank supplied 450 billion won of credit loans to mid-to-low credit borrowers, including individuals and sole proprietors, in the first quarter. Cumulative lending to mid-to-low credit borrowers has reached 16 trillion won since it launched in July 2017.

K Bank's average outstanding balance share of credit loans to mid-to-low credit borrowers in the first quarter was 31.9 percent, while the share based on the average outstanding balance of newly originated loans was 33.6 percent. Cumulative supply of such credit loans totals 8.66 trillion won since its launch in 2017.

In particular, K Bank's supply of private mid-interest-rate loans totalled 245 billion won in the first quarter, the largest among internet banks, and ranked second across the entire banking sector.

Toss Bank also exceeded its target, with the share of loans to mid-to-low credit borrowers at 34.75 percent in the first quarter, based on the three-month average outstanding balance. The share of newly originated loans was 34.46 percent, above the 32 percent target.

Toss Bank has supported a cumulative 358,484 mid-to-low credit borrowers to date, and the share of such borrowers in its loans to sole proprietors stood at 65.7 percent.

The internet banks said they are also delivering results in improving the creditworthiness of mid-to-low credit borrowers, beyond simply supplying loans.

Among KakaoBank's mid-credit loan users, 52 percent saw their credit scores rise within one month after the loan was disbursed, with an average increase of 49 points. Some 19 percent of users shifted to high-credit status.

Among K Bank customers using its 'Credit Loan Plus' for mid-to-low credit borrowers, 48.4 percent also saw credit scores rise within one month after taking the loan. The average increase was 46 points, and 12 percent shifted to high-credit status.

At Toss Bank, 46 percent of mid-to-low credit loan users experienced a credit score increase within one month, with an average rise of 43 points. Among customers holding loans from non-bank lenders, 37 percent reduced their non-bank loan balances by an average of 3.05 million won.

The banks cited the advancement of their alternative credit assessment models as a factor behind these results.

KakaoBank supplied an additional cumulative 1.1 trillion won or more in loans to mid-to-low credit borrowers through an alternative credit assessment model using non-financial data. Toss Bank used its proprietary credit scoring model, TSS, to award extra points to 35 percent of its mid-to-low credit customers in the first quarter, while 72 percent of those under 35 received the benefit.

A KakaoBank official said it will continue to expand inclusive finance based on innovation in developing data-driven credit assessment models and its risk management capabilities.