SEOUL -- Peer-to-peer lenders are growing fast in South Korea thanks to their convenience and speed, with combined loans topping 1 trillion won ($864.3 million) last month, industry data showed Thursday.
The Korea P2P Finance Association said that accumulated loans of its 56 members reached 1.2 trillion won in June, up 665.1% from a year ago when the total reached 152.6 billion won. Month-on-month, total loans rose 17.5%.
Analysts say that P2P lenders could become more popular because both investors and borrowers can access their services easily compared with traditional bricks-and-mortar banks, which require many documents from borrowers.
"It is very convenient. Borrowers can get short-term loans quickly while investors enjoy higher profitability," said Kim Soo-hyun, an analyst at Shinhan Finance Investment. "They may threaten banks' business in the long term, if they become equipped with more advanced technology infrastructure."
P2P lending connects investors and borrowers directly through internet and mobile platforms. Currently, they are classified as money-lenders, but the financial regulator plans to control them more tightly by creating a new category for them.
Lenders focusing on real estate projects are leading the market, with the biggest lender, Tera Fintech, accounting for 147.5 billion won of total loans in June, followed by Roof Funding with accumulated loans of 114.3 billion won.
Tera said that it manages risks strictly by registering land as collateral, as well as examining construction processes. "We are specialized in lending to developers of housing projects," said Jeong So-young, a company spokesperson.
Tera was established by Yang Tae-young, a real estate investor, in December 2014, making it one of the oldest P2P lenders in the country, along with Eight Percent, which focuses on individuals.
They are changing the landscape of the traditional banking industry, along with internet-only banks which offer banking services through internet and mobile platforms. K-Bank, led by the country's second-biggest telecoms company, KT, is expanding quickly and has attracted more than 1 trillion won of deposits since its establishment in April.
Kakao Bank, run by internet company Kakao, is expected to start offering services later this month. It aims to provide quick services through its popular chatting app KakaoTalk.
Some banks are bracing for changes by investing in P2P lenders themselves, or launching joint ventures with them. Jeonbuk Bank is offering P2P lending service in cooperation with People Fund.