The Korea Federation of Banks (KFB) developed an IoT-based management standard for mortgages last December for distribution to all banks in the country. (image: Siemens)
SEOUL, May 20 (Korea Bizwire) — Following the enactment of a new provision that enables value appreciation of chattel mortgages, for items such as factory machinery, when Internet of Things (IoT) systems are in place to manage them, South Korean banks are offering various IoT-based mortgage loan products and services.
The Korea Federation of Banks (KFB) developed an IoT-based management standard for mortgages last December for distribution to all banks in the country.
The standard allows for the appreciation of mortgage value within a 15 percentage point range if the mortgage is managed by IoT systems.
The application of ID technology such as QR codes, barcodes, and RFID enable appreciation of value within a range of 10 percentage points.
The new measure comes as a solution to ensure the stability of chattel mortgages.
When financial authorities announced new plans to stimulate chattel finance in May of last year, they also added new requirements to introduce IoT systems in charge of detecting any movement, damage, and operating status for the items mortgaged.
The 15 percentage point rage appreciation is fairly considerable since the loan to value ratio (LTV) for each tangible asset is normally 40 percent of the standard mortgage price.
Since the publication of the KFB standard, other banks began to apply IoT technologies for chattel mortgages.
Shinhan Bank established an IoT-based chattel mortgage management platform this January, while KB Kookmin Bank created a similar platform in March.
IoT-based chattel mortgage loans are also showing outstanding performance.
As of April, the Industrial Bank of Korea loaned 297.3 billion won (US$249 million) through the smart chattel mortgage loan services.
Considering that it took seven years to lend 405 billion won through chattel mortgage loans, IoT-based loans has already achieved 73 percent of the past performance in only 11 months.
Kevin Lee (kevinlee@koreabizwire.com)
