South Korean Youth Crypto Trading Leads to Spike in Loan Defaults at Neobanks

South Korean Youth Crypto Trading Leads to Spike in Loan Defaults at Neobanks

Loan defaults among young South Koreans involved in cryptocurrency trading are reportedly on the rise, particularly at neobanks like K Bank and Kakao Bank. According to recent data, 4.05% of K Bank customers under the age of 30 have defaulted on their loans, a significant increase attributed to the growing number of accounts linked to crypto exchange wallets such as Upbit.

This data was released by the Financial Supervisory Service following a freedom of information request made by lawmaker Kim Hyun-jung, a member of the National Assembly's Political Affairs Committee. The findings reveal that South Korean banks are facing losses of about $288 million from unpaid loans by young borrowers. This marks a 484% increase compared to December 2021, with defaults among young borrowers continuing to rise at a steady pace, seeing a 0.3% increase since the end of 2023.

K Bank, which has seen a surge in accounts linked to Upbit, has experienced default rates nearly twice as high as its neobank competitors. In comparison, Kakao Bank, which partnered with the Coinone crypto exchange in August 2022, has a 2.1% default rate for customers aged 29 and below. Toss Bank, which does not have a crypto exchange partnership, reported a default rate of 1.75% among the same age group.

Financial experts suggest that many of these young borrowers took out loans for cryptocurrency investments but failed to repay them after facing significant losses in the volatile market. As the number of defaults continues to grow, lawmaker Kim has called for stricter loan screening protocols at neobanks to prevent further financial instability.

K Bank’s ongoing rise in account activity has also pushed the company toward its initial public offering (IPO), which is expected to be completed by the end of October. However, the growing loan defaults among younger customers raise concerns about the long-term stability of such banks, especially with their heavy involvement in the cryptocurrency sector.