Banking groups divided over internet services
Korea’s major financial groups are divided internally over the possible launch of their own internet-only banking services amid fears that this may weaken their corporate identities just for the sake of jumping on the global bandwagon.
It has been only recently that discussions started picking up steam in financial circles after the Korea Federation of Banks (KFB) conducted a survey to figure out whether banking groups here were willing to start internet-only bank businesses if they get a license to do so.
KFB Chairman Kim Gwang-soo remains optimistic over the move, saying that financial holding firms can operate such services without a huge financial burden after winning approval from authorities.
But industry officials said the much-hyped vision would “not necessarily” generate the outcomes desired by existing banking groups, as they do not feel any strong need to launch internet-only banking platforms.
All the major commercial banks here are already operating and developing mobile banking services. Bank officials argued any new internet-only platform for retail customers is non-vital for the time being.
In Korea, Kakao Bank and K bank are two of the internet-only banks. Both lenders started their services in 2017, and have since grown rapidly on their digital expertise and rising demand for easier and faster banking platforms. The growth was also made possible as they are subsidiaries of tech platform operators, not
“The gist of banks’ digital business from a viewpoint of big banking groups is to keep developing their existing digital platforms, rather than launching new digital-focused businesses. ”
financial players.
“The gist of banks’ digital business from a viewpoint of big banking groups is to keep developing their existing digital platforms, rather than launching new digital-focused businesses,” an executive in charge of digital business at a major bank here said.
Internet-only banking platform providers — such as Kakao Bank and British fintech firm Revolute — keep making headlines amid the rise of digital banking, but it will take more time for them to build a strong level of credibility on the level of existing banks which have been in operation for decades, the official said.
It will not be technically hard for conventional banks to launch new internet-driven bank services, but this does not stand at the top of their priorities, as most of them do not identify it as a new source of revenue, nor do they feel any urgent need to start the service, according to him.
“For existing internet-only lenders, pursuing qualitative growth is crucial to win more credibility from customers and the market, but for big banking groups, the top priority is on the overall digital growth of their banking platforms, and launching a fresh digital business is a secondary issue,” he said.
Another official from a commercial bank here said it leaves open the possibility of launching such an internet-, mobile-only banking services in line with how favorably authorities consider the move.
“No specific discussion has been internally made over the possible launch of the internet-only bank, but we are optimistic that conventional banks can also develop differentiated digital services by launching the service,” the official said.
Discussions over the business are still in their infancy, so no concrete strategies have been devised on how the platforms would look, the source said.
“The KFB leader is at the forefront of negotiations with financial watchdogs to allow commercial banks to operate such a service,” he said. “But chances are the digital service may create new opportunities for us in any form, even if concrete visions are not shaped. We do not have to drop the idea of expanding our business into the area. But detailed discussions will be made only after authorities display any signal for us to do so.”
If the possible internet-only bank businesses generate greater-than-expected outcomes, banks may consider spinning them off, but the scenario is nothing more than an assumption without specific blueprints, the official said.
A KFB official said it will keep piling up specific ideas from major banking groups — including the so-called big five holding firms KB, Shinhan, Hana, Woori and NongHyup - to send to the Financial Services Commission (FSC).
“We will send banking groups’ opinions regarding the possible launch of their own versions of internet-only lenders to the watchdog sometime in less than a month,” the KFB spokesperson said. “The regulator will decide whether to grant licenses for them to launch digital-only banking businesses sometime in July,” he said.
The FSC is also in a position to conduct an internal review after receiving the compiled opinions from the KFB.