Gross consumer lending’s growth is continuing to outperform outstanding balance, driven by card lending, as local consumers regain their confidence in spending as the local economy reopens. However, other consumers remain financially impacted by the fallout of the pandemic and continue to rely on short-term loans to get by.
According to the Financial Stability Report released by the Monetary Policy Committee of the Bank of Korea on June 22, the rate of increase in household debt was lower than previous levels as applications for mortgages/housing slowed due to a rise in loan interest rates.
The strong penetration of credit cards in the country means that many local consumers are not interested in the emerging concept of Buy Now, Pay Later (BNPL) as an alternative, as the level of payment is limited from KRW150,000 to KRW300,000 per month. Furthermore, traditionally, only credit card players can provide deferred payments (by instalment) in the country.
To address rising competition from fintech companies such as KakaoBank, Naver Financial, and Toss Bank, mainstream financial service providers such as banks and card issuers are increasingly adopting digitalisation strategies. Considering that operating a membership service on a mobile app and providing online loans is already well established in South Korea, players are now looking to become more approachable by adopting the mainstream culture of younger generations.
Internet banking is only likely to gain further momentum as part of consumer lending in South Korea over the forecast period, as digital banks such as KakaoBank and Toss Bank are rapidly expanding in the retail financial space. Although their overall size is lower than existing traditional banks, their development is creating potential for further new entrants due to the increasing demand for remote services and payments.
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Understand the latest market trends and future growth opportunities for the Consumer Lending industry in South Korea with research from Euromonitor International's team of in-country analysts – experts by industry and geographic specialisation.
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Consumer Lending
Aggregate of Consumer Credit and Mortgages/Housing. Gross Lending: The total value of loans advanced by institutions in a given year; data refers to single year only. Outstanding Balance: The collective amount owed by borrowers at the end of a given year; data refers to the cumulative impact of debt.
See All of Our DefinitionsThis report originates from Passport, our Consumer Lending research and analysis database.
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