Naver Account 100 Days Before Launch: "A Loud Party of Rumors"

Financial Sector on Edge Over High Interest Rates and Benefits
But Growth Stalls After 300,000 Sign-Ups in First Month
3% Promotion Also Ends

[Asia Economy Reporter Kim Min-young] “Big tech companies like Naver and Kakao, which possess data on tens of millions of users and have fully established internet platforms, entering the financial industry could pose a crisis unlike anything seen before.” (Chairman of Financial Group A)

“Fair competition is already insufficient, yet there are issues of fairness due to discriminatory regulations between the financial sector and big tech. It will be a battle against giant platforms, and we are very concerned about how to respond.” (President of Bank B)

70,000 Naver Bank Accounts Expected by Year-End

The rumors were frightening. On June 8, when Naver officially entered the financial market, the financial sector feared losing all their customers to the giant platform. Considering the power of large platforms used multiple times daily by the majority of the population, there was a belief that the financial market landscape could change instantly. Additionally, unlike large financial companies bound by various regulations, big tech companies have largely avoided such regulations, which further heightened the sense of crisis. But was the start just a loud noise? The performance of Naver Bank, which will mark its 100th day since launch on the 15th, has been found to be weaker than expected. Even major financial group chairmen were tense about the ‘dinosaur’ Naver’s first penetration into the financial sector, but for now, it is being evaluated as a ‘storm in a teacup.’

According to the financial sector on the 9th, Naver Financial, Naver’s financial subsidiary, partnered with Mirae Asset Daewoo to launch the ‘Naver Bank’ account, which has about 400,000 accounts opened in the first two months. In the first month (June 8 to July 3), 270,000 accounts were acquired, but in the second month of July, the increase was only about 130,000. The promotion offering 3% interest without conditions ended this month, so the number of new subscribers is expected to decline further. The financial sector forecasts that the number of Naver Bank account holders will reach 700,000 by the end of this year.

Naver Bank is a comprehensive asset management account (CMA) product jointly offered by Naver Financial and Mirae Asset Daewoo. It attracted attention by offering an annual 3% yield and up to 9 percentage points in rewards linked to Naver’s shopping and pay services. The integration with the Naver platform raised concerns in the financial sector that customers could be lost not only from banks but also from securities and card companies.

However, the industry evaluates that Naver Financial’s first ambitious financial product has underperformed. Kakao Pay Securities’ account, launched last February, surpassed 500,000 accounts in just over a month and exceeded 1 million subscribers by its 100th day.

Controversy Over Naming and Deposit Protection

The slowdown in Naver Bank’s popularity is interpreted as partly due to resistance from the financial sector, especially commercial banks. When Naver Bank was launched, the banking sector questioned whether it was appropriate to use the name of a giant IT company, Naver, together with the term ‘bankbook’ for a CMA account that is not protected by deposit insurance. Financial sector insiders reportedly conveyed these concerns not only publicly but also behind the scenes to financial authorities.

One financial sector official said, “At the beginning, financial consumers confused Naver Bank with a bank account, but after observing this controversy, they realized that it is a CMA product without deposit protection.”

There are also criticisms that the product’s appeal has diminished due to many additional conditions after the promotion. From this month, to receive a 3% yield on up to 1 million KRW, the previous month’s Naver Pay payment amount must be at least 100,000 KRW; otherwise, the interest rate is only 1%. Even if conditions are met, the 3% applies only up to 1 million KRW, with 1% for balances between 1 million and 10 million KRW, and 0.35% for amounts exceeding 10 million KRW, which is not much different from bank deposit interest rates, making it difficult to attract subscribers.

From Bank Accounts to Insurance and Loans

Nevertheless, the financial sector remains vigilant about Naver’s advances into finance. After launching the bank account, Naver Financial registered the ‘NF Insurance Service’ corporation, which operates as an insurance agency (GA), on June 22, and plans to introduce small business loans and postpaid payment services within the fourth quarter of this year. Mirae Asset Capital will handle the loan service, while Naver Financial will conduct loan screening. The core is an independent alternative credit scoring system (ACSS), which is expected to play a role in mediating loans to business operators who find it difficult to obtain loans from existing financial companies.