Cumulative loans to mid- and low-credit borrowers top 16 trillion won ($11.6 billion); more than 10 financial firms set to adopt 'KaPlScore' this year
Kakao Bank has used a non-financial data-based alternative credit scoring model to extend more than 1 trillion won in additional loans to mid- and low-credit borrowers, drawing recognition as a case study in inclusive finance amid growing importance of alternative credit assessment across the financial sector.
Kakao Bank said Thursday it had supplied a total of 1.2 trillion won in additional loans to mid- and low-credit customers through its alternative credit scoring model.
The bank developed its proprietary alternative credit scoring model, "Kakao Bank Score," in the second half of 2022 — the first in the industry to do so — using pseudonymized combined data from the Kakao Group, Lotte Members, Kyobo Book Centre and the Korea Financial Telecommunications and Clearings Institute. By applying the model to credit loan screening, Kakao Bank improved its ability to differentiate among mid- and low-credit borrowers and thin-file customers, broadening the pool of eligible applicants. It has also developed an industry-specific credit scoring model for small-business owners — combining business location data in pseudonymized form — to more effectively assess borrowers in sectors such as food service and online retail.
While the financial industry's use of alternative data had largely been limited to adding simple bonus points to existing scores, Kakao Bank built a separate model composed entirely of alternative data and applied it to loan screening, demonstrating the practical value of non-financial data in credit assessment.
Since introducing the alternative credit scoring model in 2023, about 12 percent of Kakao Bank's mid- and low-credit loans by number of cases have gone to customers who would have been rejected under the conventional model. The total supplied to individuals and small-business owners approved through the alternative data model — which draws on retail transaction and transfer records — reached 1.2 trillion won. Cumulative mid- and low-credit loans extended by Kakao Bank since its launch in July 2017 have now surpassed 16 trillion won.
Kakao Bank is also accelerating the refinement of its model by steadily expanding the range of alternative data providers and the scope of data it uses. Most recently, the bank subdivided its industry-specific model for personal business credit loans into four categories — lifestyle services, retail, food service and online sellers — to sharpen its ability to differentiate borrowers by sector.
Kakao Bank is also opening its proprietary alternative credit scoring model to outside financial institutions, playing a catalytic role in broadening financial access across society.
After signing an MOU with NICE Information Service in June last year, Kakao Bank has been providing alternative credit scores to select savings banks and capital companies since early this year. The "Kakao Bank Platform Score," or KaPlScore, embedded in NICE Information Service's credit information system, was developed separately as an upgraded version of the existing model so that outside financial firms can use it as well. Its distinguishing feature is the integration of non-financial alternative data drawn from customers' actual consumption and lifestyle patterns — including micropayments, taxi use and shopping. Financial firms that have adopted KaPlScore are expanding loan supply by improving the accuracy of their assessments of mid- and low-credit borrowers and thin-file customers.
More than 10 financial firms are expected to incorporate Kakao Bank's alternative credit scoring model into their loan screening processes this year. Kakao Bank said it plans to give more financial institutions access to alternative credit assessment through innovation and wider adoption of its scoring technology, contributing to broader market expansion.
"For those who have not received a fair evaluation under the existing financial assessment framework, alternative credit scoring will serve as a breakthrough that opens more precise and equitable opportunities," a Kakao Bank official said. "We will consistently refine our proprietary assessment technology and share it across the market, working to realize truly inclusive finance where no financial consumer is left behind."
won@heraldcorp.com
