The number of online banking users in South Korea has climbed to a record high, yet loan applications through the channel have moved in the opposite direction. Banks have tightened their non-face-to-face windows first as household lending rules piled up from the second half of last year, including caps on mortgage limits and a tougher stress debt service ratio (DSR).
Individual online banking users at 19 domestic banks and the post office totaled 234.37 million as of the end of June, counting duplicates, up 4.9% from 223.41 million a year earlier, according to the Bank of Korea's Economic Statistics System on the 30th. Corporate users rose 5.5% to 15.659 million. Both figures are the highest on record.
Lending told a different story. Online banking loan applications in the first half of this year came to 5.4164 million, down 10.5% from 6.0537 million a year earlier, while the value of those applications fell 26.0%. Payment and settlement data released the same day showed daily average applications of 30,000, down 10.5%, and 600 billion won, down 26.0%. That contrasts with a 24.4% increase in the value of fund transfers.
The declines line up with the timing of the rules. In the third quarter of last year, just after the June 27 policy package and the July 1 rollout of the third phase of the stress DSR, application values plunged 34.9% in three months. As the September 7 and October 15 packages further narrowed borrowing limits, the average value per application fell 9.2%, to 23.03 million won in the second quarter of this year from 25.36 million won in the second quarter of last year.
The bar itself has risen. The central bank's loan officer survey put the lending attitude index for household mortgages at minus 19 in the second quarter, with a forecast of minus 11 for the third quarter. A lower reading means loans are harder to obtain. The weighted average mortgage rate on new loans at deposit-taking banks rose to 4.48% in July from 3.96% last September, the highest in two years and eight months.
The outlook for the second half is no brighter. With financial authorities capping this year's household loan growth target at 1.5%, most banks exceeded their quotas around July and shut off non-face-to-face lending first. Hana Bank suspended new non-face-to-face mortgages from August, while Shinhan Bank and Woori Bank are limiting daily intake of non-face-to-face credit loan applications. Authorities raised the target to 3.0% in August, but much of the added room is flowing into group loans such as interim and balance payments. Because group loans often go through agents, analysts say they are unlikely to translate into more online applications.
"Whenever regulators tighten, we have no choice but to close the non-face-to-face lending windows, including online banking, first," an official at a commercial bank said.
