South Korean Fintech firms, namely Naver Pay, are actively developing and adopting their own credit score models to expand their opportunities for growth.

Compared with traditional models, the new criteria put more emphasis on borrowers’ non-financial information, which critics say could enable those with lower credit scores to borrow money.

According to sources familiar with the financial industry, several Fintech companies are either expanding their existing operations or developing alternative credit assessment models.

Naver Corp.’s mobile payment service unit, Naver Pay, earlier developed its credit-decisioning criteria Naver Pay Score in collaboration with the credit rating agency NICE Information Service Co. and plans to deploy it across various financial institutions.

Naver’s alternative model considers data on transactions and payments on Naver Pay, as well as official financial information, including past loans and savings, to make credit-granting decisions.

With this series of non-financial information included in the analysis, more self-employed borrowers witnessed their credit scores jump compared with when they relied on traditional models and became able to get the loans that would be otherwise inaccessible, according to the company.

Pinda Inc, which operates as a prominent loan comparison platform in Korea, is also set to launch its alternative credit score model as early as 2024. To that end, the platform operator secured the sales data from 110 million stores across the country following an acquisition of OpenUb, a market analysis platform, in July 2023. The combined use of artificial intelligence (AI) and the data will the platform to analyze potential sales over a six-month period.

The industry sees potential in these novel credit score tools, which can attract new loan customers who might not have a borrowing history, such as housewives, self-employed individuals, and young people.

By Yang Se-ho and Han Yubin

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