KOREA NEWS Fintechs vie to be next internet-only bank in Korea

Fintechs vie to be next internet-only bank in Korea

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By Lee Kyung-min

Three financial service providers are vying to become the fourth internet-only bank in Korea, buoyed by lowered entry bars and strong interest income-backed profit by the existing three banks over the past two years despite an economic slowdown, market watchers said on Sunday.

Experts say the attempts will be in vain, unless underpinned by sustainable financial soundness and competent trust- and capital-oriented business plans. The skepticism is explained in large part by soaring delinquency rates of low-income, poor-credit borrowers over the past few years, a development highly likely to continue due to rising inflation and sustained high borrowing costs.

The existing internet-only banks are Toss, a mobile money transfer app owned by Viva Republica, Kakao Bank, operated by mobile messaging service provider Kakao Corp., and K bank, operated by telecommunications firm KT. Their combined net income in the third quarter reached 117.2 billion won ($88.7 million), up 25.8 percent from the year before.

The Kakao subsidiary registered the largest nine-month profit as of September. K bank logged a surplus for the 10th consecutive quarter. Toss Bank turned in its first quarterly profit since its launch two years ago.

The tentative names of the three bidders are Soso Bank, backed by a coalition of 6.7 million small merchants nationwide, 3o3 Bank, operated by tax return service provider Jobis and Korean Credit Data (KCD) Bank. KCD Bank operates a cash note for management and accounting services for small businesses.

Lowered bar

The Financial Services Commission (FSC) in July announced a revision to ease the application and screening processes for a license to open an internet-only bank in order to resolve monopoly issues. The three bidders have been preparing applications since the announcement.

On Dec. 6, Soso Bank said it will apply for a license, saying the borrowing system operated by small merchants will give strength in innovation and efforts for inclusive finance, in line with the so-called “mutual growth” drive spearheaded by the Yoon Suk Yeol administration.

It plans to outline business strategies to bolster lending to members of 1,600 small cooperative associations at mid- to low-interest rates, a niche market with a firm customer base long neglected by commercial banks.

Jobis made the announcement on the same day. It said it aims to get preliminary approval in the first half of next year after forming a consortium.

“We will enable small retailers as well as self-employed or job seekers to create new opportunities to help change their lives,” it said.

KCD has also set up a task force to prepare for the process before June.

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