Innovation can be defined in many ways. Among those, my favorite is to define it as the ability to kill and eat a great (even better, if it’s the entire) share of an existing market. And it is because in this world of surpluses of everything, pretty much the only way to create a market as an innovation is meant to is to kill the old industry by making it obsolete.
There are always some people with the needs for a sizable capital but have an issue with acquiring it. And we all know that it is not because there’s a lack of capital out there. The issue arises at the intersection of the borrowers’ needs and the cost of such a capital the lenders demand. They only thing about the Korean market of lending capital is that the gap is dramatic.
Korean loan market is bi-polarized in terms of the sources of capital and the respective cost of capital of each source. The first and the most desired capital source is the major commercial banks which put 4-point-something percent of interests a year on the capital they lend. On the other hand, if you are not going to be eligible for a loan at such institutions, then you will head out to your second choice of sources such as 2nd-tier commercial banks, savings banks, and credit unions, who charge much heftier interests which is up to 36% a year on the loaned capital.
The dramatic difference between the sources creates a huge room of opportunities for the mid-range interests. And 8 Percent – a Seoul-based P2P lending Company, seems like it was born to capture it.
8 Percent, established in December 2014 as the pioneer of Korean P2P lending industry, strategically set the target APR at 8 percent as its name indicates, that is somewhat the middle value between the interest rate of major commercial banks and that of a credit card loans around 16% - which is another very common form of quick cash loan in the country.
When a borrower applies for a capital, 8 Percent review the application on various factors such as the borrower’s credit score, use of capital, and other proprietary measures, and present the screened deals on every Monday, Wednesday, and Friday. The resulting interests rates of the deals 8 Percent presents to its lenders range from 5% and under to 15% and over, however the majority (74.71% to be exact) of the borrowers pay the interest rates of 5% to 11%, and 49.5% of the deals are between 7% to 11% of interest rates.
As a result, for the past six months, 8 Percent has grown 90% every month, and recently surpassed the accumulation loan amount of KRW 10 billion mark, without any report of failure to pay back.
Along the way, 8 Percent has launched multiple lending projects which have captured the public attention, such as loans for startup employees and loans for manufacturing companies to bridge capital for government procurement projects. In November last year, it was approved as the first Online-only Bank by Korean Government as part of Korea Kakao Bank consortium with Daum Kakao – the operator of nation-dominant mobile messenger service Kakao Talk, and Korea Investment Holdings. And last January, 8 Percent successfully landed on its most recent investment round of KRW 10 Billion from KG Inicis, one of the leading PG (Payment Gateway) companies in the country.