Savings Banks to Start Open Banking as Early as March
Attracting Customers with Relatively High-Interest Products
Benefits Even as Use of Savings Banks via Commercial Banks Increases
[Asia Economy Reporter Song Seung-seop] The savings bank industry is intensifying efforts to attract customers ahead of the launch of the open banking service. They aim to target a new market with special savings and deposit promotions featuring dramatically higher interest rates compared to commercial banks. This is because they are in a position to catch up with commercial banks that have secured open banking services, and since securities firms and card companies are also expected to participate in open banking, incentives are deemed necessary.
Savings Banks Attract Open Banking Sign-ups with High Interest Rates
According to the savings bank industry on the 27th, among the five major savings banks?SBI, OK, Welcome, Korea Investment, and Pepper?more than three are reportedly preparing various promotions such as special savings and deposit products ahead of the open banking service, which is expected to begin as early as March. Although specific periods and scales have not been finalized, considering that interest rates have typically been set 1-2 percentage points higher than existing rates, it is anticipated that products will be offered with rates not exceeding 5%. Most related products are expected to be launched around the start date of the open banking service, with some companies considering a proactive launch within two weeks.
Open banking is a service that standardizes and opens banks’ remittance and payment networks, allowing all accounts to be used through a single application (app). As of the end of last year, 59 million users (including duplicates) had signed up, and 96.25 million accounts were registered. Commercial banks are actively working to retain existing open banking users by revamping apps and conducting various prize events. Competition in the open banking market is expected to intensify further as card companies and securities firms enter the field.
The industry expects that the high interest rates offered by savings banks will have a strong effect on securing initial customers. A savings bank official predicted, "In this era of ultra-low interest rates, the deposit sector ultimately comes down to an interest rate battle," adding, "There is strong demand to earn even 1% more interest, so it will be competitive." Another official explained, "Because the interest rates are high, savings banks can attract a lot of cash that is dormant in accounts."
Savings banks also seem optimistic about an increase in the influx of the 20s and 30s age group, who mainly use parking accounts (ordinary deposits, savings deposits, corporate free deposits) that pay interest even for just one day. The deposit interest rates for savings bank parking accounts range between 1.5% and 2.0% per annum, higher than those of commercial banks or securities firms’ CMA accounts. Since parking accounts are frequently used for temporarily holding funds for stock trading and other purposes, users of parking accounts could become open banking subscribers.
Industry: "No Loss Even If Short-term Effects Are Absent"
The savings bank industry holds the view that even if such marketing strategies do not yield immediate visible results, there is little risk of loss. Even if the number of savings bank open banking subscribers is lower than expected, having many savings bank accounts accessed through commercial bank apps is still beneficial. An industry insider said, "It is true that some savings banks currently have inconvenient apps and low popularity," adding, "With open banking enabling the use of savings bank accounts through commercial banks, convenience can be dramatically improved without significant costs."
However, there is a forecast that open banking will further shrink the business power of small and medium-sized savings banks. While non-face-to-face and digital customers are increasing, companies with capital of only a few hundred million won are unable even to attempt the IT development required for open banking. A financial sector official predicted, "Ultimately, open banking will lead to a sorting and restructuring of the savings bank industry through a process of selecting the strong from the weak."
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