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Regulator expects digital banks to reform banking services

All News 15:10 January 23, 2017

SEOUL, Jan. 23 (Yonhap) -- South Korea's banking industry will go through upheaval with the introduction of online-only banks, a senior financial regulator said Monday.

A couple of banks specializing in Internet banking services -- Kakao Bank and K-Bank -- plan to begin operations in the coming months.

"Consumers expect price competitiveness and new services they have not enjoyed so far," said Jeong Eun-bo, vice chairman of the Financial Services Commission (FSC), on a visit to the headquarters of a team that's preparing to launch Kakao Bank in Pangyo, just south of Seoul.

For the financial industry, they are a "differentiated player" that will promote competition and innovation, he added.

Jeong said consumers will benefit from deposits with higher interest rates and payment services with lower fees that are available from cuts to the costs of operating bank branches.

Taking advantage of "accurate credit assessment" based on big data, they will also be able to reach out to low- to middle-income people who borrow money from nonbank lenders, he pointed out.

He called for thorough preparations for the start of related services and stressed the importance of winning the public's trust from the early stages.

An image of South Korea's two planned online-only banks provided by Yonhap News TV (Yonhap)

An image of South Korea's two planned online-only banks provided by Yonhap News TV (Yonhap)

Kakao Bank will be led by Kakao Corp., the operator of the nation's dominant mobile chat app KakaoTalk. It has partnered with eight other firms, including KB Kookmin Bank.

It has an initial capital of 300 billion won (US$256 million) and around 210 employees.

It is waiting for the FSC's issuance of a business license.

K-Bank has already received the regulatory body's approval for its envisioned services, the first authorization here in 24 years to open a local bank.

A consortium of KT Corp., Woori Bank and 19 other companies plans to launch the digital bank within the next few weeks.

It will be capitalized at 250 billion won with some 200 employees and its headquarters located in the central Seoul district of Gwanghwamun.


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