Inclusiveness needed for a fourth internet bank

The use of innovative credit rating models and inclusive digital financial instruments is the core of the 4th internet bank.

CHO WON-KYEONGThe author is a professor at UNIST and the head of the Global Industry-University Cooperation Center. While the proportion of self-employed people is the lowest ever, the proportion of one-person business owners is the highest ever. The proportion of self-employed people who survive after five years of opening a business is half, at best. Depending on the industry, the number of small business owners with less than 10 or 5 full-time workers is also decreasing.

Lately, the increase of self-employed loans has slowed down, while the delinquency rate has been rising. The delinquency rate of loans to the vulnerable self-employed is 10.15 percent, far higher than that of the non-vulnerable self-employed, 0.44 percent. The Bank of Korea proposed that active debt restructuring is necessary for some vulnerable self-employed people with low rehabilitation potential.

It is important to make good policies and systems, but it is most important to apply and implement the policies in the field. The Minister of SMEs and Startups said this at the 2024 Financial Support Committee, in which all six heads of Korea’s major banks participated. The minister encouraged cooperation of the banking sector to smoothly execute loan transfers and new guarantors.

Until now, the Financial Policy Committee also stressed that support for small business owners should not be a one-off measure. It emphasized the need to internalize “debt management considering the repayment ability of borrowers” into a system.

Meanwhile, a discussion of establishing a fourth Internet bank for small business owners is in full swing. The current three Internet banks — KakaoBank, Kbank and Toss Bank — are faced with criticism that they lack innovation differentiating themselves from existing banks. Therefore, key evaluation factors for a bank for small business owners in the future would be an alternative credit rating model and the possibility of realization.

What do the winners of the 2024 Nobel Prize in Economics have in common? They proved the prosperity of a country with an inclusive system and the decline of a country with an exploitative system through theoretical and practical examples. The use of innovative credit rating models and inclusive digital financial instruments is the core of the 4th Internet bank. We need to create a system where small business owners armed with ideas and a pioneering spirit can succeed without money or connections. I look forward to the optimal financial system of inclusion and innovation for small business owners.