Korean digital banks partner with regional lenders to enter corporate lending

South Korea's digital-only banks and regional lenders are moving beyond their traditional partnership territory. For years, when KakaoBank worked with Busan Bank or when Toss Bank joined forces with Kwangju Bank, the focus stayed narrow: consumer loans for salaried workers. That boundary is shifting. KakaoBank and Busan Bank signed a memorandum of understanding in April and are now preparing to launch a joint lending program aimed at small and medium-sized businesses and sole proprietors—a significant expansion of what these partnerships have historically covered.

The logic is straightforward for both sides. Internet-only banks like KakaoBank have built their business on household lending, reaching millions of customers through mobile apps and digital interfaces. But they lack the institutional knowledge and track record in business lending that regional banks have accumulated over decades. Busan Bank, by contrast, knows how to assess and manage loans to local enterprises, but its reach stops at the edge of its region. The partnership lets each fill what the other lacks: KakaoBank brings a nationwide platform; Busan Bank brings expertise in evaluating business borrowers. A Busan Bank official described the arrangement as combining "traditional corporate lending with an online platform," a model neither could easily build alone.

This is not the first such move. Toss Bank and Kwangju Bank introduced the industry's first joint consumer loan in 2024. Kbank and Busan Bank followed with their own offering that same year. KakaoBank and Jeonbuk Bank launched a partnership in 2025. All three focused on salaried workers—a relatively low-risk segment. The shift into business lending represents a deliberate next step, one that signals how both types of institutions see their future.

KakaoBank's own numbers show the momentum. Its outstanding loans to sole proprietors reached 3.69 trillion won, or roughly $2.67 billion, by the end of the second quarter of this year. That figure had grown by 284 billion won in just three months, indicating a sharp acceleration. The bank is clearly betting that business lending is where growth lives next.

But the partnerships are not just about ambition—they are responding to a real shift in how Korean companies finance themselves. Rising global government bond yields have made it more expensive for firms to borrow directly from capital markets. Corporate bond issuance in the first half of this year totaled 25.9 trillion won, down 31.5 percent from the same period a year earlier. Companies are voting with their wallets, and they are choosing bank loans instead. The four major financial groups—KB, Shinhan, Hana, and Woori—saw their combined lending to six major conglomerates rise 12.9 percent to 109.7 trillion won in the same period. Bank financing is becoming the path of least resistance for companies that need capital.

For internet-only banks, this environment is an opening. They can build experience and accumulate data in business lending while the demand is there. For regional banks, the digital platforms of their partners offer a way to escape the geographic limits that have defined them. Neither type of institution could have predicted a decade ago that they would be essential to each other. Now they are discovering that they are.