Third online bank, Toss, to start business

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Third online bank, Toss, to start business

Toss Bank's headquarters in Gangnam on Monday. Toss Bank, Korea's third online-exclusive bank, will be making its debut on Oct. 5. [NEWS1]

Toss Bank's headquarters in Gangnam on Monday. Toss Bank, Korea's third online-exclusive bank, will be making its debut on Oct. 5. [NEWS1]

Toss makes its official debut as the country’s third online bank on Tuesday.  
 
Toss, a fintech company founded in 2013, already has 1 million people applying for time deposit accounts, thanks to the generous 2 percent interest rates it is offering.

 
The other two online banks, KakaoBank and K-bank, offer 1.6 percent.  
 
Toss is also expected to appeal to people wanting to borrow, as its maximum interest rate on unsecured loans is 2.76 percent, lower than at other banks.  
 
The lowest interest rate on unsecured loans offered by Kakao and K-bank is above 3 percent.  
 
Toss is only offering unsecured loans of up to 270 million won ($227,000). 
 
The government has been trying to tighten loan regulation to shrink the record-breaking levels of household debt.  
 
Conventional banks have been cutting back on lending.  
 
“Pre-applications [of 1 million] for the bank’s [deposit] account products are a sign that customers have a great interest in what the bank has to offer,” said Jun Bae-seung, an analyst at eBest Investment & Securities.  
 
“Toss Bank plans to roll out low interest rates on loans, deposit accounts with enormous benefits and debit card cashback,” Jun said. “It wants to manage risks stably and efficiently by building its own credit rating system using its own customer data in addition to the conventional credit rating model.”
 
Toss already has 11 million monthly active users, higher than established banks such as KB Kookmin and Shinhan, which have around 8 million.  
 
KakaoBank has 13 million.  
 
However, considering that Toss’s capital is only 250 billion won, the maximum amount of loans it can offer is expected to be around 3 trillion won.  
 
Additionally, the government’s attempts to limiting household debt are expected to affect even Toss.  
 
“Considering the squeeze on household loans and upward pressure on rate spreads, legacy and branchless banks will have to be on guard for possible changes in the competitive environment,” said Jun, the eBest Investment & Securities analyst. “Toss Bank’s aggressive strategies may draw the attention of regulators as well.” 
 
It is the first launch of a new bank in Korea since 2017.  
 

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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