Expectations are reaching new heights for Korea’s first online-only banks, or direct banks, to spark enormous changes not only in the country’s 120-year-old financial sector but also in other industries including information technology and retail.
The financial authorities have given preliminary approval to two consortiums ― Kakao Bank and K-Bank, led by mobile messenger creator Kakao and mobile carrier KT, respectively ― to set up the banks with no brick-and-mortar branches. They will be the first new commercial banks to be set up here in 23 years.
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Yoon Ho-young (right), executive director of Kakao Corp., poses with Kim In-hoe, executive director of KT Corp., prior to a joint press conference in Seoul on Monday. Yonhap |
The two groups said they would be “game changers” in the industry by providing fresh impetus with their innovative capabilities ― mobile messengers, telecommunications services, big data analysis on a wide user base ― to the “outdated and inefficient” banking industry.
“The members of the Kakao Bank consortium hope to serve as a catalyst to revitalize and change the Korean banking industry,” said Yoon Ho-young, vice president of Kakao Bank’s mobile bank division, at a press meeting in Seoul on Monday to announce the plans to launch the Internet banks.
He added that the Kakao Bank consortium would be able to provide various benefits for customers, utilzing the allies’ service platforms in different sectors ― mobile messenger KakaoTalk, which has 38 million subscribers, mobile payment service KakaoPay with 5 million users, e-commerce Websites Gmarket and Auction, the nation’s leading music streaming site Melon, and online book store Yes 24.
The two consortiums will first start building online banking systems, beefing up teams dedicated only to the operations of the branchless banks, and running a series of security tests before getting the final approval within the first half of next year.
Customers ― mostly individuals and small and medium-sized enterprises ― will be able to make use of mortgage loan and money transfer services through Kakao Bank and K-Bank.
Joining hands with their global partners, the consortiums are also making plans to offer global financial services down the road.
Chinese Internet giant Tencent, which currently holds around a 4 percent stake in Kakao Bank, will cooperate with Kakao in banking businesses both in Korea and China. Kakao is also planning to install mobile banking services in a mobile messenger it runs in India.
Unlike other advanced industries like electronics and shipbuilding, the nation’s banking industry has been often considered an underdog compared with those of other economic powerhouses including the U.S., Hong Kong and the U.K.
China is also making no bones about its desire to lead the newly mushrooming Internet-based financial market, supporting IT firms ― Alibaba, Baidu and Tencent ― to jump on the bandwagon.
Tencent established China’s first Internet-only bank WeBank in January following by Alibaba’s MYbank in June. Most recently, Baidu announced its plan to set up BaiShin Bank together with state-owned investment firm CITIC Group earlier this month.
Some critics pointed out that one of the factors that have hampered earlier moves for the establishment of the Internet-only banks is a delay in passing a revised bill to ease regulations on the stakeholders of commercial banks through the National Assembly.
The pending bill, when approved, will allow the participants of the consortiums to hold up to 50 percent stakes in Internet-only banks, up from 10 percent in the current law.
Berating the lawmakers for delaying the revision that would attract more investment in Internet-only banks and revitalize the nation’s finance sector, venture firms, which will be among the major beneficiaries of the branchless banking services, have recently called for the swift passage.
“The establishment of the first Internet-only banks will give financial lifelines to start-ups on a tight budget and contribute to the creation of new businesses and jobs,” an official from a venture association said.
By Kim Young-won (
wone0102@heraldcorp.com)
