In operation for nearly five months, South Korea’s first online-only bank K Bank has proved its capability to absorb borrowers holding mid-credit scores by bringing the delinquency rate of loans under control, data showed Monday. 

Over half of K bank’s 64,251 loans went to mid-credit rate borrowers as of Aug. 14, according to data from the Financial Supervisory Service. The 35,754 loans to mid-credit rate borrowers accounted for a fifth of the monetary value of all K bank loans, amounting to 635.4 billion won ($558 million).

K bank’s loan delinquency rate of mindrange interest rate loans, which measures loan portfolios that have payments overdue for at least a month, came to 0.028 percent. Midrange interest rate loans by K bank come with rates of between 4.26 percent and 9 percent. They are extended to borrowers with credit scores of between 4 and 7 on a scale of 1 to 10, who are typically refused loans by conventional banks and underserved in the polarized lending market.

This came in contrast to the sharp surge in the delinquency rate in conventional banks’ midrange interest rate loans in the first year of service. For instance, commercial lender Woori Bank’s WiBee Mobile Loans, which target mid-credit rate borrowers, saw its overdue rate surge to 2.3 percent after six months of operation in 2015.

K bank’s loan delinquency rate for all household loans stood at 0.007 percent. As of June, the average delinquency rate of financial institutions in South Korea came to 0.41 percent.

K bank has reportedly assessed the credit level of borrowers with mid-range credit ratings by using customer data provided by business partners such as telecommunications firm KT and card services firm BC Card.

By Son Ji-hyoung 
(consnow@heraldcorp.com)