Kakao, KT to launch Korea’s first Internet banks
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Two consortiums, led by South Korean Internet giant Kakao and No. 2 telecom operator KT, were approved to launch the nation’s first Internet-only banks next year, the banking authority said Sunday.
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.
Their operations are expected to start after they get financial approval in the first half of next year. The Financial Services Commission requested they come up with stricter security measures.
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| Do Kyu-sang, financial services chief at the Financial Services Commission, speaks at a media meeting held at the agency`s briefing room in Seoul on Sunday. Yonhap |
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.
KT’s K Bank was also praised for better customer access as it has teamed up with partners from diverse sectors such as telecommunications, payments and retail, it said.
Internet banks come as the government looks to open up its financial services sector recently. Internet companies are already jumping into the bandwagon amid the rapid infiltration of online banking and mobile payments here.
Due to stringent financial regulations, however, they are still required to partner with a licensed bank to launch their own Internet bank.
Kakao and KT are especially pinning high hopes on “middle-interest loans” that would appeal to small borrowers.
Currently, top-tier banks offer an annual rate of 3 percent to 5 percent, while the secondary financial institutions such as mutual savings banks or capital services firms charge whopping 15 percent to 34 percent interest rates.
“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.”
Internet banks say they can better evaluate the creditworthiness of borrowers based on the data they collect from hundreds of millions of mobile devices — including location, the use of local services and e-commerce transitions.
Kakao Bank plans to bring Kakao’s traffic resources, big data on users and data analytics, while its bank partners KB Kookmin Bank and Korea Investment Holdings have knowledge of financial products.
The bank also aims to go global as it has secured ties with Tencent, China’s biggest social-networking and mobile games company, and the U.S. online retail giant eBay, which also owns Korea’s two leading shopping sites Gmarket and Auction.
“We will ramp up efforts to offer diverse and practical benefits for customers through Kakao Bank,” said Yoon Ho-young, Kakao’s senior vice president.
K Bank also showed confidence in building a more accurate credit rating system based on KT’s own delinquency customer list and the data collected from its card and bank partners, including Woori Bank, the nation’s second-largest lender in terms of assets.
“We will expand benefits for small borrowers and start-ups,” said Kim In-hoi, the bank task force leader. “We aim to become the No. 1 Internet bank by offering more convenient on- and off-line services.”
Questions & Answers
Q.What types of financial services will these new internet-only banks provide?
What types of financial services will these new internet-only banks provide?
The new banks will offer deposits, lending, credit cards, and foreign exchange transactions. They will provide these services exclusively through their online platforms.
Q.How do Internet banks plan to assess the creditworthiness of borrowers differently from traditional banks?
How do Internet banks plan to assess the creditworthiness of borrowers differently from traditional banks?
Internet banks aim to evaluate creditworthiness using data from hundreds of millions of mobile devices. This includes information like location, local service usage, and e-commerce transactions.
Q.Which companies are partnering with Kakao Bank to support its launch and operations?
Which companies are partnering with Kakao Bank to support its launch and operations?
Kakao Bank has partnered with KB Kookmin Bank and Korea Investment Holdings for financial product knowledge. It has also secured ties with Tencent and eBay for global aspirations.
Q.What is the expected timeline for these new internet-only banks to begin their operations?
What is the expected timeline for these new internet-only banks to begin their operations?
The internet-only banks are expected to start operations after receiving final financial approval in the first half of next year. Their launch was approved on Sunday.