"Banking Sector Must Strengthen Digital Transformation Efforts to Enhance Profitability"

Forecast, Financial Risk Review Autumn Issue Published
Includes 6 Articles on Topics such as Introduction and Prospects of Gongdongjaebo Insurance

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] It has been pointed out that domestic banks need to strengthen efforts not only to diversify revenue sources and reduce costs but also to accelerate digital transformation in order to improve profitability.

Senior Researcher Cho Sung-ah of the Korea Deposit Insurance Corporation mentioned in a report titled "Strategies and Implications for Enhancing the Profitability of Domestic Banks," published in the autumn issue of the Financial Risk Review on the 10th, that "domestic banks are pursuing efforts to diversify revenue sources such as overseas expansion and alternative investments, as well as cost reduction, but are facing difficulties due to recent environmental changes such as the spread of COVID-19."

Senior Researcher Cho advised, "With the acceleration of digital transformation, it is necessary to create opportunities for efficient digital transformation and profitability improvement through non-face-to-face product development, expansion of non-face-to-face sales channels, and partnerships such as business integration with big tech and fintech companies."

He also stated, "For domestic banks to secure continuous revenue sources beyond the limited domestic market, overseas expansion is inevitable; however, entry barriers have increased due to national lockdowns caused by the recent spread of COVID-19. Indiscriminate expansion should be avoided, and localization strategies need to be established based on thorough analysis."

The autumn issue of the Financial Risk Review also included a report emphasizing the need to prepare for the possibility of increased latent risks due to prolonged low interest rates amid the prolonged COVID-19 pandemic.

Kim Wan-jung, team leader at Hana Financial Management Research Institute, expressed concerns in "Changes in the Financial Market Environment and Fund Flow Outlook Due to COVID-19" that "massive liquidity supply from COVID-19 support measures has increased private sector debt, and prolonged low interest rates have caused a concentration of market funds in certain asset markets such as stocks and real estate."

He advised, "As latent risks accumulate during this process of leverage expansion, caution is needed regarding the possibility of increased volatility in the event of future shocks."

In addition, a total of six major financial market and industry issues were covered, including "Introduction and Outlook of Joint Reinsurance" and "Risk Factors and Implications of P2P Lending."