Entrepreneurs and industry standbys from South Korea have been at the forefront of developments in the consumer electronics and mobile device markets, but recent news from a regulatory group could soon have South Koreans leading the race toward online-only banking as well.
Reuters reported that South Korea’s Financial Services Commission gave preliminary approval late Sunday (Nov. 30) to two consortia that would establish the country’s first ever online-only financial institutions. With news of the early-stage regulatory thumbs up, both groups — one run by the Kakao Corp and the other by a subsidiary of Alibaba Group Holding — received substantial boosts to their respective stocks when South Korean markets opened Monday morning.
“They’ll stir up fresh competition in the banking industry and create more job opportunities,” Doh Kyu-Sang, director general of the FSC’s Banking and Insurance Bureau, told Phys.org.
Reuters explained that the Kakao-backed group will invest more than $259 million into its online banking operations, with another $345 million investment coming in 2018. However, the investment group could see consumer-facing operations up and running as soon as early 2016.
What does this mean for banking in one of Asia’s financial hubs? According to some experts, like KTB Investment and Securities analyst Kim Hyung-min, the introduction of online-only banks that don’t have to content with the profit-draining process of paying rent and maintaining physical branches could disrupt the industry in a major way.
“Their debut could deal a blow to major commercial banks for a certain period,” Hyung-min told The Nation.
Though the Alibaba-backed group did not release details on when its branch-free bank might begin operating, it did announce that more than $215 million had been earmarked for available project capital. With a war chest like that, setting up online-only banks might not cost Alibaba and Kakao the pretty penny that they would make in backing them in the first place.
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