Under the government’s pilot program, the two banks will offer financial services from deposits, lending and credit cards to foreign exchange transactions through their online platforms only – the first of their kind in Korea’s 23 years of financial history.
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Kakao Bank and K-Bank were vying for their license with a third candidate, I-Bank, which was to be run by Internet shopping mall Interpark.
“An Internet bank is meant to give non-financial players, including IT firms, chances to enter the banking sector if they have feasible business plans to improve the financial market and customer rights”, the FSC said earlier’. The financial regulator anticipates the two banks will play a role in helping to revive the slumping banking industry. The two consortiums participated in the bid on the premise that the banking law will be revised.
Kakao Bank and K Bank will individually apply for the final approval after satisfying the human and material requirements.
The Kakao-backed consortium, in which Korea Investment & Securities [KOINVS.UL], Kookmin Bank [KOOKM.UL] and Loen Entertainment are also partners, plans to invest an initial 300 billion won ($259.72 million) into the bank, with 400 billion won more to be invested in 2018, the regulator said.
According to the agency, Kakao’s Kakao Bank gained high scores for innovative services based on its immensely popular mobile messenger app KakaoTalk with 40 million users. Woori Bank, GS Retail, Hanwha Life Insurance and Danal all have a 10 percent stake each in the new bank.
“It will create a new loan market for lower credit rating borrowers and expand customer services”. It marks the beginning of a major transformation of South Korea’s financial industry.
The U.S., China and Europe have allowed private businesses to operate their own banks since the mid-1990s, while Sony and e-commerce company Rakuten in Japan as well as China’s Tencent already run their own Internet banks.
“(The introduction of Internet banks) will encourage local banks toimprove their customer services and stir up a new round of competitionin the industry”, said Doh Kyu-sang, director general of the Banking andInsurance Bureau at the FSC.
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The FSC believes the bill should pass before the Internet bank is officially approved.
