It is pointed out that various aspects of financial polarization are occurring, such as polarization of credit loan capacity due to income and asset disparities, polarization of financial access by region, and digital alienation according to age.
On the 29th, the Financial Economy Research Institute of the Financial Union published a report on financial and economic trends on the subject of financial polarization and digital financial alienation.
According to the research institute, the wealth gap by income is widening. The overall average income and average disposable income by income decile increased over the four years from 2017 to 2020. However, the increase in the first income quintile was far below the increase in the income quintile. According to the Household Welfare Survey of the National Statistical Office, the disposable income of the first decile increased by 1.42 million won from 8.67 million won in 2017 to 19.90 million won last year. However, the gap with average disposable income increased from 36.53 million won to 38.09 million won during the same period.
This is because the increase in disposable income of the income quintile was steep. Disposable income in the income quintile increased by 5.46 million won from 13.39 million won to 18.55 million won during the same period. The gap with the average disposable income widened from 58.19 million won to 63.7 million won.
If we look at the increase in assets in the income quintile in detail, the increase in debt stands out. In the income quintile, the debt-to-asset ratio was 19% as of last year, 5.1 percentage points higher than the 12.9% income quintile. In particular, the ratio of financial liabilities to financial assets is 56.7%. The gap with 40.2% of the first income decile is large. The passage that the higher the income, the greater the financial debt can be interpreted in a different way as that the financial institutions are good at making loans. If you look at the actual status of household credit loans by financial institutions, as of March, commercial banks account for 84% of high-credit loans. Da-yeon Kang, a research fellow at the Institute of Financial Economics, said, “It seems that a large portion of high-credit loans are used for asset investment. It is limited, and the polarization phenomenon is deepening.”
In addition, he pointed out that commercial banks closed their stores for profitability reasons, limiting the use of face-to-face services for the financially underprivileged, centered on the elderly in rural areas. However, regional banks that used to support face-to-face services are also reducing their branches as more IT companies enter the financial industry, which is expected to accelerate this phenomenon. In particular, the elderly are vulnerable to digital transformation, which encourages alienation. As a result of last year’s survey on the digital information gap by the Ministry of Science and ICT, the digital information level of the elderly was 68.6%, lower than the overall average of 72.7%. Researcher Da-yeon Kang pointed out, “Behind the benefits of the change in the digital financial environment, there are many problems such as the deepening income and asset gap, polarization such as the loan market structure centered on high credit users, and financial inequality due to differences in accessibility.”