Alternative credit information service will be implemented in earnest from April for ‘thin filers’ such as students, beginners, and housewives, and is expected to expand opportunities for loan approval and interest rate benefits
Financial companies are actively developing alternative credit rating models to target “thin filers” who have been unable to borrow due to a lack of financial transaction history. It is to create a model that can complement the existing credit rating system by using various alternative information.
According to the financial sector on the 30th, NICE Evaluation Information and the Korea Financial Telecommunications & Clearings Institute will start providing alternative credit information services for ThinFiler in April this year, which has been difficult to borrow due to lack of financial information. NICE evaluation information will provide the service to financial companies in stages, starting with Kakao Bank this year.
The key to this service is to supplement the existing credit rating system by utilizing alternative information such as account transfer and ATM transactions of the Korea Financial Telecommunications & Clearings Institute. As a result, it is expected that the possibility of approving loans by scene filers will increase and opportunities to benefit from interest rates will expand.
“I am confident that this service will play a key role in supporting the financially underprivileged and realizing inclusive finance,” said Kim Jong-yoon, CEO of NICE Evaluation Information.
As such, financial companies are entering the market to develop alternative credit rating models for “Thin Filers,” who have the ability and intention to use finance but have been unable to borrow due to lack of financial transaction history. In the existing credit rating method, lack of financial transaction history makes it difficult to accurately evaluate due to lack of data for credit rating, making it difficult to get a loan even though it has the ability to repay loans.
Scene filers are mainly for students, newcomers to society, and housewives who live by receiving living expenses from their parents. They are undervalued even though they have the ability to use finance due to their small history of financial life in their name.
Accordingly, financial companies viewed the scene filers as a new market and actively began developing alternative credit rating models to embrace them.
Kakao Bank has been operating the industry’s first self-developed “Kakao Bank Score” since 2022. Kakao Bank Score is an alternative credit rating model developed by Kakao Bank using the Kakao community’s history of “gift giving,” “taxi ride information,” and “book purchase” or pseudonymized combination data with Lotte Members, Kyobo Bookstore, Korea Financial Telecommunications & Clearings Institute, and Danal.
Kakao Bank explains that if Kakao Bank scores are applied to loan screening, the group of customers who can borrow can be expanded. This is because the existing financial information-oriented credit rating model can increase discrimination against mid- and low-credit people and scene filers who lack financial transaction history, which have been difficult to evaluate accurately.
Kakao Bank is also using an alternative credit rating model for loans to individual businesses. It has developed a credit rating model specializing in small business industries that can effectively evaluate repayment capabilities even for industries with relatively low financial access by combining various workplace information with pseudonym information and is applying it from the first half of 2023.
Toss Bank is also applying financial and non-financial alternative data to its credit rating model based on big data. Based on its own data accumulated since the days of Toss simple remittance, it is designed to verify economic activities, consumption tendencies, and repayment capabilities from various angles, and faithful repayors are selected through consistent consumption activities.
Naver Pay is also using its own alternative credit rating model, ‘Naver Pay Score’. Naver Pay Score is an alternative credit rating model that combines non-financial data such as online payment history, shopping history, and communication fee payment records held by Naver Pay as well as traditional financial transaction information of existing credit rating agencies (CB).
Since the end of 2020, Naver Pay has applied an alternative credit rating model to business loans, and in 2023, it has developed into a “Naver Pay Score” along with Nice rating information to establish an evaluation system with about 73 million big data technologies such as pseudonymized data, AI, and machine learning.
Source: mk.co.kr
