COVID-19 Transformed the Financial Sector... Expansion of Non-Face-to-Face Transactions in Banks and Insurance (Comprehensive)

Sharp Increase in New Deposit Product Sign-ups via Bank Mobile Apps
Insurance Companies Also Encourage Non-face-to-face Sales...Concerns Over Performance Decline

On the 24th, as concerns over the spread of COVID-19 grow, citizens wearing masks are commuting at the Gwanghwamun intersection in Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kim Min-young] The financial sector's culture is changing due to the spread of the novel coronavirus infection (COVID-19). As people refrain from going out, the number of customers visiting banks has decreased, while non-face-to-face transactions such as internet banking and mobile banking have increased. Insurance companies have also recommended insurance planners to conduct non-face-to-face sales in preparation for emergencies.

According to the financial sector on the 27th, non-face-to-face banking transactions have surged since the spread of COVID-19 in South Korea. Between the 19th and 25th of last month, the number of new subscriptions to deposit products through the smart banking application (app) of Bank A was recorded at approximately 67,280 cases. This is about a 58% increase compared to around 42,560 cases during a similar period last year (January 20 to February 28, 2019).

Focusing on the third week of February (16th to 22nd), when confirmed cases rapidly increased, new subscriptions during this period were about 11,260 cases, approximately 68% higher than the same week last year (17th to 23rd, about 6,690 cases). Deposit products refer to checking and savings account openings, deposits, installment savings, and comprehensive housing subscription savings.

During the period around the first confirmed COVID-19 case in South Korea on the 20th of last month (January 19 to February 25), non-face-to-face new transactions averaged about 1,740 cases per day. During a similar period last year (January 20 to February 28, 2019), about 1,060 cases were conducted daily.

Due to the impact of the novel coronavirus infection, the Myeongdong shopping street in Seoul is showing a quiet scene despite it being the weekend on the 9th. Photo by Yoon Dong-joo doso7@

The number of checking and savings account openings alone is even more dramatic. From the 19th of last month to the 25th of this month, the number of accounts opened through the app was about 6,880 cases, which is more than 2.8 times higher than the approximately 2,420 non-face-to-face account openings from January 20 to February 28 last year. Opening an account via the mobile app indicates new customers of the bank, suggesting an increase in customers who started transactions using mobile banking for the first time since the COVID-19 outbreak.

Bank B also saw an increase in total non-face-to-face transactions. Between the 16th and 22nd, transactions through all non-face-to-face channels such as internet banking and smart banking apps at this bank reached about 10 million cases, up from 8.6 million cases during the same period in 2018 and 9.6 million cases last year.

On the other hand, visits to branches have noticeably decreased after the COVID-19 outbreak. A banking sector official said, "It is estimated that the number of visiting customers has decreased by about 30%," adding, "Especially, customers visiting branches in the Daegu and Gyeongbuk regions, where confirmed cases are rapidly increasing, have sharply declined." Another financial sector official said, "The increase in mobile app users over the past year has contributed to the rise in non-face-to-face transactions," but also noted, "Since the COVID-19 outbreak, more customers are trying to handle banking tasks non-face-to-face."

Insurance companies are also preparing to increase non-face-to-face sales. Major life insurance companies, including NH Nonghyup Life, Samsung, Hanwha, and Kyobo, have already encouraged their planners to conduct non-face-to-face sales.

The problem lies in sales capability. Unlike banks, insurance companies heavily rely on face-to-face channels, raising concerns that this could be fatal to their performance. As of November last year, 97.97% of the initial insurance premiums (the first premiums paid) for life insurance companies were subscribed through face-to-face channels.

Due to the complex structure of insurance products and the low incidence of voluntary subscriptions, the recommendation and persuasion by planners are essential for subscriptions. Since planners cannot meet customers directly, sales are inevitably hit hard. Insurance companies have mandated planners to wear masks and frequently use hand sanitizers, providing guidelines, but there are reports that customers are reluctant to meet planners.

An insurance industry official said, "Since insurance sales mainly rely on face-to-face interactions, if planners conduct aggressive sales and get infected, it could backfire, so we are recommending non-face-to-face sales to planners," adding, "However, since planners' livelihoods depend on this, it cannot be enforced." He continued, "If the spread of COVID-19 continues, performance will inevitably be affected."