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 two banks, which won a preliminary license, will start operation in earnest in the first half of next year after receiving a final approval at the end of this year and early next year.
At the plenary meeting on Nov. 29, the Financial Services Commission (FSC) said it gave a preliminary approval to Kakao Bank and K-Bank after the review of their qualifications to set up Internet-only banks. This is the first time in 23 years that any new business entity has been allowed to enter the nation’s banking industry. Peace Bank of Korea, formerly Woori Bank, was the last to be allowed to operate in the banking sector in 1992.
According to the agency, Kakao’s Kakao Bank gained high scores for innovative services based on its immensely popular mobile messenger app KakaoTalk. 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. The I-Bank consortium led by Interpark Corp. has become the only one that failed to grab a preliminary license among the three participants.
For Kakao Bank, Korea Investment Holdings Co. will take part as a major shareholder with 50 percent share, while Kakao and Kookmin Bank own 10 percent share each. The K bank’s major shareholders are Woori Bank, GS Retail Co., Hanwha Life Insurance Cp. and Danal Inc, which all have a 10 percent stake each in the new bank. KT holds 8 percent
Kakao Bank and K Bank will individually apply for the final approval after satisfying the human and material requirements. Once they receive the official approval form the FSC, they need to start operation within six months.
Aside from this preliminary approval, the authorities are planning to revise the Banking Act that lowers barriers that keep non-financial companies from owning banks, and allow the second stage of entry into Internet banks. The revised bank law is designed to aim to expand non-financial companies’ stake in a web-based bank from the current 10 percent (4 percent of voting rights) to 50 percent.
Now, the ball is in the hands of the National Assembly. The two consortiums participated in the bid on the premise that the banking law will be revised. However, many difficulties are expected in order to pass the bill.
Once Internet banks, which offer services that allow consumers to open savings and installment savings accounts, take out loans, receive asset management consultation and purchase financial products at anytime and anywhere, are opened, the whole banking industry is expected to face a great upheaval.