The making of unsecured consumer loans (consumer finance) is defined as “a business of lending money for the liabilities of goods and services consumed individually by a consumer, backed by the consumer’s credit as collateral.”

Before and shortly after WWII, loans to consumers were mainly provided by pawnshops, which used goods as collateral. However, social and economic changes such as an increase in national income, improved living standards, and the transition to a mass consumption society backed by mass production following the high economic growth of the postwar period gave birth to new needs. Such changes triggered the emergence of consumer financing companies born in the early 1960s, prompting the shift to consumer finance, which provides loans using “personal credit” as collateral.

While banks and other financial institutions specialized in large corporate loans, consumer finance companies expanded their business by concentrating their managerial resources into small unsecured loans for individuals and expanding services that met customer needs. Large consumer finance companies, in particular, expanded their market through constant innovation, such as developing a scoring system (automated credit screening system), increasing channels to attract customers by introducing automated contract machines and unmanned stores, and enhancing CD/ATM networks through partnerships with financial institutions, while building their unique know-how in areas ranging from lending to credit management.

In recent years, online applications have come to account for a majority of applications due to substantial changes in the Internet environment, urging consumer finance companies to focus on creating a more efficient web environment by developing smartphone apps and improving the usability of their websites. With the addition of the progress of IT innovations such as fintech and AI, consumer finance companies now provide services and credit that better meet the needs of consumers, such as card-less transactions at convenience stores, which did not exist in conventional consumer finance, and loans based on more accurate credit scores.