SEOUL, Nov. 30 (Korea Bizwire) - Kakao Bank led by online portal giant Kakao Corp. and KT Corp.-initiated K-Bank have been picked as the operators of South Korea’s first-ever Internet bank on Sunday. It is the first time in 23 years that a new commercial bank has opened in the country’s banking industry.
Two big IT firms — Kakao and KT — won the rights to operate onlinebanks, beating the Interpark-led I-Bank consortium.
As the operator of No. 1 mobile chat application KakaoTalk with 34 million users and the largest fixed-wire operator, Kakao and KT have advantages on the number of customers and stabilized fintech platforms.
An Internet bank, or direct bank, is a bank that offers services remotely via online and telephone banking without brick-and-mortar offices or face-to-face channels. Such banking emerged in the 1990s with the advent of online banking technology.
South Korea, which is regarded as one of the most wired countries inthe world, had tried to launch such online banks in the early 2000s, but failed to do so due to many legal obstacles including an ownership ban and real-name financial regulations.
Under the current laws, an industrial company is prohibited from holding more than a 4-percent stake in a bank, and the company must have less than 2 trillion won in assets at the same time.
This year, the FSC announced a plan to re-introduce the direct banking business as part of its efforts to deregulate the local financial industry and foster the fast-growing financial technology sector.
The FSC said the Internet bank project is aiming at letting industrial companies with high-end banking technology own an online-only bank, attracting cash-rich IT firms to invest in the long-slumped bankingindustry and promote the fintech sector, a combination of finance and technology.
It is considering raising the stake ceiling to about 50 percent toattract IT firms and bring more money into the sector.
The FSC also eased real-name financial transaction regulations for onlinebanks as it had been impossible for Internet-based banks to identify the real name of an individual who opens an account in person.
The new guideline allows banks to use the public authentication program issued by financial institutions, text messages or telephone callsto identify customers who want to use the banking services, including deposits, loans, payments and fund sales.
Along with such deregulation efforts, the regulator stressed that IT firm-led consortiums would get an advantage over other teams.
“An Internet bank is intended 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.’
Under the FSC plan, Internet-only bank operations will range from deposits, lending and credit cards to foreign exchange transactions, and their financial soundness would be regulated the same as other commercial lenders.
Experts said direct banks will help borrowers receive better interest rate terms because the operators can reduce the costs of running offices and buildings and hiring tellers and officers.
The two bidders also came up with plans to attract those clients who are not allowed to borrow money from commercial banks due to lower credit ratings.
They are also expected to remove commission fees on money transactions or withdrawals, or offer free 24-hour transaction services through their Internet-only platform, which will lead existing banks tostrengthen cost-saving efforts and renew their customer service strategies.
“(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.
“It will create a new loan market for lower credit rating borrowers and expand customer services.”