Credit Management Deemed Vital amid Consolidation of Financial Services

Article excerpt

In recent days, major firms in three lending fields -- credit card service, installment finance and lease -- have undergone a change whose potential impact on customers may be huge.

As regulations barring lending institutions from doing business in other fields are slowly lifted, the ``consolidation of financial services'' is now the talk of the town.

For instance, Samsung Group, the nation's third largest conglomerate, recently renamed its installment finance subsidiary Samsung Capital and launched a service targeting corporate and individual users, a significant change in corporate strategy according to market watchers.

Other installment finance firms followed suit by adding ``Capital'' to their names last month. LG Capital is expanding its coverage to installment financing, leasing and general loans to individuals. Hyundai Capital is also ready to start credit card business as soon as it obtains a government permit.

With financial information converging into a pool shared by numerous lending outfits, consumers should pay more attention to their credit ratings so as to be eligible for loans on favorable terms, analysts said.

``In the near future, individual customers will be required to manage their credit in a sophisticated way so as to avoid being disadvantaged by the rapidly changing lending practices,'' said Lee Chong-geun, president of Juwon Co., a dealer affiliated with Samsung Capital, in an interview with The Korea Times.

Lee said that detailed financial information on a given customer, including deferred debt, can be checked with the click of a mouse or a simple phone call to the commonly shared credit information pool in the course of deciding whether to extend a loan.

``It is very likely that those with a bad credit rating will be banned from engaging even in simple transactions like obtaining a mobile phone subscription,'' Lee said.

He is now engaged in an effort to crack a niche market in the changing financial sector. While large conglomerate-affiliated lending companies are likely to focus on the make-or-break battle in the market, small dealers are sure to make more rapid progress in this field, Lee explained.

In May last year, Lee noticed faint signs of change in the financial field and conducted market research in the field of installment finance.

According to Lee, medium-sized enterprises may eventually garner some benefits from installment finance firms but small businesses, which do not have the assets to offer as collateral, were entirely excluded from the lending channel.

``The problem was that big finance firms could not check and review the financ al status of small companies or venture firms to extend even a tiny loan,'' Lee said.

Lee founded Juwon Co. last year with three partners. It became the first official Samsung Capital dealer shop.

Lee's perception of the market fit in well with Samsung Capital's advanced credit management system in launching the shop.

Samsung Capital established BSS (behavior scoring system) and ASS (application scoring system) last November, both of which were the first of their kind for a company specializing in lending.

``Instead of classifying customers by category or by occupation, the BSS and ASS meticulously record and manage individual customer's credit status, point by point,'' said Choe Sun-kwan, manager of Samsung Capital's planning and public relations team.

Choe said such systematic checkups make it possible for the company to extend loans to corporate and individual users while significantly reducing costs and risks. …