Amid digitalization drive, banks expand offline services for wealthy

South Korean banking groups are opening more offline asset management centers exclusively for the nation’s superrich, while closing regular branches and replacing them with mobile and artificial intelligence-based services.

On Tuesday, Shinhan Financial Group said it upgraded and rebranded two of its wealth management centers in Seoul to focus on providing exclusive banking services for its clients with personal assets of over 10 billion won ($8.3 million). The wealth management centers now dubbed “Shinhan PWM Family Office” offer its superrich clients and family members corporate consulting, tax, real estate, and legal services alongside non-financial privileges including benefits on booking golf courses and restaurants.

The rebranded centers in Gangnam and Seoul Finance Center, located in central Seoul, are among 28 of Shinhan’s private wealth management centers across the country.

Shinhan, the nation’s No.2 banking group by total assets, is among its peers that have opened more of such private wealth centers; while shutting down its regular branches that cater to less wealthy customers.

Of the total 1,507 bank branches shuttered by Korean banks from January 2016 to October 2021, Shinhan’s flagship Shinhan Bank closed a total of 136 in the cited period, a Financial Supervisory Service data submitted to an opposition lawmaker here showed Feb. 2. But none of Shinhan’s 28 wealth management centers were closed in the cited period.

Shinhan made headlines last year after it retracted its decision to shut down a branch in Wolgye-dong, a relatively low-income neighborhood in northeastern Seoul due to the community’s protest. Instead, it decided to downsize the branch with fewer employees.

“There is only one Shinhan branch at Wolgye-dong, while there are five branches, including a PWM center in the rich neighborhood of Apgujeong-dong in Gangnam,” the Citizens’ Coalition for Economic Justice, a financial civic group here said in December last year.

Shinhan’s industry rival KB Financial Group is another player in the industry playing an aggressive game to attract superrich clients. It is currently building a 7-story private banking center for clients with personal assets of over 3 billion won in Gangnam, scheduled to open in July. KB’s flagship KB Kookmin Bank, meanwhile, closed a total of 225 branches across the country from 2016 to October 2021, according to the FSS data.

Woori Financial Group, which its flagship bank shuttered 165 branches in the period, opened a special wealth center for clients with assets of over 3 billion won in October 2020 and a similar center exclusively for corporate leaders in central Seoul in July last year. Hana Financial Group in June 2021, launched a wealth center for clients with assets over 3 billion won in the rich neighborhood of Hannam-dong. Hana’s flagship Hana Bank closed the most number of branches among four major commercial lenders here with 304 in the five-year period, FSS data showed.

The banks’ closing of more branches come as mobile and online banking has been gaining popularity here, prompting financial institutions to downsize offline businesses. However, this has been creating issues for the nation’s aged population unfamiliar with mobile and online services.

Of the 50 million population, those over 65 years old accounted for 16.5 percent of the total or 8.5 million as of 2021, data from Statistics Korea showed.

It also comes as the number of the rich with personal assets of over 1 billion won increased last year. According to a report compiled by KB last year, the number of rich Koreans with assets of over 1 billion each gained 11 percent on-year to 393,000.

Noting the financial polarization, the financial authorities in recent years have been trying to partner up commercial banks with Korea Post, which oversees post offices across the country, but the project has yet to bear fruit, with industry sources saying that they have been unable to reach an agreement.

By Jung Min-kyung (mkjung@heraldcorp.com)