Naver and Kakao Financial Sector Invasion... Banking Sector on Alert (Comprehensive)

Major IT Companies Launching Financial Products One After Another
Banking Sector Trembles as 'Digital Transformation' Becomes a Matter of Survival

[Asia Economy Reporter Kim Min-young] IT giants like Naver and Kakao are racing to challenge the financial sector. Banks are clearly worried that the fintech (finance + technology) leadership might shift to techfin (technology + finance). Although they 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 AI consultation service in the financial industry. Through this AI consultation service, customers can receive necessary information immediately without waiting time. The focus was on the core of digital, ‘speed.’ In April, the bank held a marathon video conference for 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 evaluated as a product infused with the bank’s digital mindset, offering a new concept service called ‘another account within the account.’

Woori Bank has taken a decisive step in 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 that provides customized practical digital training. Hana Financial Group defines digital talent into three categories: 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 digital transformation is due to the urgency for survival. Giant platform operators like Naver and Kakao have entered the financial market one after another, offering unprecedented interest rates and benefits.

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

In fact, IT giants are intensifying their financial market invasion. Recently, Naver Financial launched the ‘Naver Account,’ which offers 3% annual interest (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 more than 100,000 KRW per month via Naver Pay, they receive 3% interest on balances up to 1 million KRW. Although banks try to dismiss it by saying it is different from a deposit account, people in their teens to 30s 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 through the popular messenger KakaoTalk app and then register their Hana Bank account to this account. It offers fee exemptions for bank mobile/internet banking and ATMs, targeting the younger generation.

The financial sector entry of major telecom 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% interest on excess deposits, providing attractive benefits. KT is participating as a major shareholder in the internet-only bank K Bank.

These IT companies are aggressively attracting customers by offering unprecedented interest rates and benefits that cannot be found in traditional banks. Banks, already unable to offer attractive interest rates due to the low-interest environment, are anxious about customer attrition. 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 prepare countermeasures.” Previously, Kakao Pay Securities’ deposit account surpassed 500,000 subscriptions in less than a month after its launch, marking a successful path.