'IT Gongryong' Shaking the Financial Sector... Banks Trembling

Naver, Kakao, SKT, and Others
On High Alert for Financial Product Launches
Banks Betting on Digital Transformation for Survival

[Asia Economy Reporter Kim Min-young] As IT giants like Naver and Kakao rush to launch financial products, banks are becoming increasingly anxious. IT companies equipped with platforms are entering the market through alliances with financial firms, but banks clearly worry that the fintech (finance + technology) leadership might shift to techfin (technology + finance). Although banks are focusing on digital transformation and continuously introducing countermeasures, experts predict it will not be easy to compete against large platform companies.

According to the financial sector on the 10th, Shinhan Bank recently launched the first-ever artificial intelligence (AI) consultation service in the financial industry. Through the AI consultation service, customers can receive necessary information immediately without waiting time, focusing on the core digital value of ‘speed.’ In April, the bank held a marathon video conference over four days, struggling to transform digitally.

KB Kookmin Bank also unified its non-face-to-face and face-to-face marketing. It recently launched the MyFit Account and Savings targeting the MZ generation (born from the 1980s to early 2000s). This product, a deposit and withdrawal account, features ‘money splitting,’ which allows one account to be managed separately for basic expenses, living expenses, and emergency funds according to management purposes. It is regarded as a new concept service described as ‘another account within an account,’ reflecting the bank’s digital mindset.

Woori Bank has taken a decisive step toward digital transformation by launching a ‘Digital Innovation Committee’ at the group level. Hana Financial Group recently launched ‘DT University’ to nurture digital talent. DT University is an integrated education platform providing customized practical digital training. Hana Financial Group defines digital talent as digital business experts, digital IT experts, and innovative technology experts, and aims to develop every employee into an expert in at least one of these fields.

The reason banks are putting their lives on the line for digital transformation is the urgency for survival. This is because giant platform operators like Naver and Kakao have been entering the financial market one after another with unprecedented interest rates and benefits.

An executive at a commercial bank said, “There is no reason why a second Coupang or Market Kurly won’t emerge among fintech companies,” adding, “If banks do not prepare, they will not only be ignored by young customers but also face a serious threat to their survival.” He continued, “We need to collaborate with platform companies, but there is concern that this could lead to dependency and weaken banks’ brand power regarding financial products.”

In fact, IT giants are intensifying their assault on the financial market. Recently, Naver Financial launched the ‘Naver Account,’ which offers an annual interest rate of 3% (on accumulated funds) and up to 3% points (on payment amounts). This account is a comprehensive asset management account (CMA) created in partnership with Mirae Asset Daewoo. If subscribers pay at least 100,000 KRW per month using Naver Pay, they receive 3% interest on balances up to 1 million KRW. Although banks dismiss it as “different from a deposit account,” people in their teens to thirties are reacting explosively, saying, “Naver has launched an account.”

Kakao Pay has gone a step further by collaborating with commercial banks to introduce a mobile account. The ‘Hana Kakao Pay Account,’ launched with Hana Bank, allows users to open a new account non-face-to-face via the popular messenger app KakaoTalk and then register their Hana Bank account to this account. It offers fee waivers for bank mobile/internet banking and ATMs, targeting the younger generation.

The financial sector entry of major telecommunications companies is also increasing. SK Telecom plans to launch the ‘T Advantage Account,’ a free deposit and withdrawal financial product, on the 15th in partnership with KDB Industrial Bank and mobile financial platform Fink. This account offers a 2% interest rate on balances up to 2 million KRW and 0.5% on excess deposits, providing attractive benefits. KT is a major shareholder of the internet-only bank K Bank.

These IT companies are aggressively attracting customers by offering unprecedented interest rates and benefits not found in traditional banks. Banks, already unable to offer attractive interest rates due to the low-interest environment, are anxious about losing customers. The bigger concern is that competition with big tech companies owning platforms is not easy. Especially if Naver, which dominates the domestic platform market, fully enters the financial industry, banks fear they will be defenseless in their home territory.

A bank official said, “There is considerable internal tension,” adding, “Especially if Naver fully enters the financial industry, we will inevitably fall behind in content and platform competitiveness, so we are struggling to devise countermeasures.” Previously, the deposit account launched by Kakao Pay Securities achieved success by surpassing 500,000 subscriptions in less than a month after its launch.