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[Herald Interview] 8Percent leverages power of platform

P2P lending platform offers reasonable rate and exposure to investors with direct purchasing power

The Korea Herald is publishing a series of interviews on promising startups in the fintech industry. This is the sixth installment. — Ed.

Peer-to-peer platform can be a destination not only to retail investors seeking higher yields, but also for borrowers taking loans for their business which would face more expensive options from conventional financiers, 8Percent, a South Korean P2P lending platform, said.

The power of such a platform is particularly attractive to borrowers holding midrange credit scores as they relatively lack a choice of lenders that have been declined by banks and instead must turn to loan usurers which have an interest rate of over 20 percent.

In addition to providing a more “reasonable rate,” P2P platforms can offer other opportunities such as marketing effects, Lee Hyo-jin, chief executive at 8Percent, said in an interview with The Korea Herald.

Companies that have used the 8Percent platform include Korea’s leading vehicle-sharing app operator Socar, solar energy firm S-Power and restaurant chains Power Plant and The Booth. 

8Percent Chief Executive Officer Lee Hyo-jin (8Percent)
8Percent Chief Executive Officer Lee Hyo-jin (8Percent)
“To be honest, Socar would have had options to get business loans other than us,” Lee told The Korea Herald in an interview, recalling that the car sharing firm borrowed money in 2015 through 8Percent despite having a high credit rating. 

“But (firms like Socar) also had a marketing aim, and it worked.”

For example, a P2P investor into Socar was given a 1-hour free-driving offer each month for a year, until the loan matured. The offer was part of a return to about 600 retail investors, who lent a combined 1.3 billion won ($1.19 million) to the car-sharing firm in July 2015.

Vouchers for restaurants, such as Power Plant and The Booth, were given as rewards to investors.

“Those investing through the 8Percent platform are trendsetters and consumers with purchasing power,” she said. “Borrowers could kill two birds with one stone, by receiving loans at a reasonable interest rate and marketing to those with purchasing power.”

According to a December estimate by 8Percent, three-fourths of investors, who offered an accumulated 97.7 billion won in loans, were from metropolitan areas -- either Seoul or Gyeonggi Province -- while those in their 20s or 30s accounted for over three-fourths of investors. The investors, without tax being deducted, are offered on average 9.78 percent interest for investments.

Some 65 percent of its borrowers -- about 5,000 – had a credit rating between 4 and 6 on the scale of 1 to 10. 

8Percent was also no exception to boosting their business by facilitating other fintech firms’ power of platform.

8Percent partnered with Viva Republica, operator of the nation‘s top wire service provider app Toss, which is moving to adopt various financial services including P2P investing and lending. Following discussions in September, the 6.5 million Toss app users can choose to use P2P credit lending service on the Toss platform, provided by 8Percent.

In November, 8Percent raised the legal maximum of 700 million won through equity crowdfunding by Korea’s largest crowdfunding plaform Wadiz. The firm said it would use the fund to improve its own credit rating model.

Formerly a banker, the 34-year-old Lee found it “discouraging as a P2P lending player” to have the upper cap on the maximum investment per a P2P investor at 10 million won a year, following the financial watchdog‘s guidelines that went in effect in May.

“For a P2P investment to be perceived as an investment destination, what counts is rather the volume of return than the rate of return,” Lee said. “As we believe we have built enough trust with the customers, there being the maximum volume of investment is quite discouraging.”

Lee launched 8Percent in November of 2014, after being inspired by Lending Club in the United States.

“There was no such thing as algorithm-powered investment portfolio at the very beginning,” Lee said, referring to its first portfolio in 2014 worth a combined 5 million won, evenly sourced by 25 investors.

But the service “went viral,” Lee added, so much so that the service faced a temporary shutdown by the Financial Supervisory Service in February 2015.

Nearly three years later, 8Percent is one of the first three to be recognized in October as P2P lending platform operators, along with rivals Tera Funding and Lendit, by the FSS.

Also, the firm began offering algorithm-backed portfolios in February 2016. Now the number of automated portfolios account for about 70 percent.

By Son Ji-hyoung (
Korea Herald Youtube