Savings Banks to Start Open Banking as Early as March
Attracting Customers with Relatively High-Interest Products
Beneficial to Use Savings Banks via Commercial Banks' Open Banking
[Asia Economy Reporter Song Seung-seop] The savings bank industry is stepping up efforts to attract customers ahead of the launch of the open banking service, which is expected to begin as early as March. They aim to target new markets with special deposit and savings 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 already 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 Customers with High-Interest Products
According to the savings bank industry on the 27th, among the five major savings banks?SBI, OK, Welcome, Korea Investment, and Pepper?three or more are preparing various promotions such as special deposit and savings products ahead of the open banking service expected to start 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 highly likely that products featuring interest rates around 5% will be launched. Most related products are expected to be released around the start date of the open banking service, with some companies considering launching them proactively 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 (including duplicates) users had signed up, and 96.25 million accounts were registered. Commercial banks are actively working to retain existing open banking subscribers by revamping their 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.
Savings banks have been upgrading their digital infrastructure since mid-last year by revamping their apps and strengthening security capabilities to prepare for the introduction of open banking. SBI Savings Bank launched the mobile banking platform ‘Cider Bank 2.0’ with new services in November last year, and Welcome Savings Bank plans to release a fully revamped ‘WelBank 3.0’ app in the first half of this year. OK Savings Bank started a project last month on the 17th with the LG CNS-Bankware Global consortium to build a next-generation system.
Industry: "Deposits Ultimately Depend on Interest Rates"… No Loss Even if Effects Are Modest
The industry expects that combined with the high interest rates of savings banks, these efforts 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 customers in their 20s and 30s, who mainly use parking accounts (current accounts, savings accounts, corporate free deposit accounts) that pay interest even if money is deposited for just one day. The deposit interest rates for savings bank parking accounts range from 1.5% to 2.0% annually, higher than those of commercial banks or securities firms' CMA accounts. Since parking account users frequently deposit and withdraw funds temporarily held for stock trading, they are likely to become open banking subscribers.
The savings bank industry believes that even if such marketing strategies do not yield immediate noticeable 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 bank apps are inconvenient and lack popularity," adding, "If open banking allows the use of savings bank accounts through commercial banks, it will dramatically improve convenience without significant costs."
Savings Banks Also Face 'Sorting Out' Centered on Large Firms
However, there are forecasts that open banking will further shrink the business capabilities of small and medium-sized savings banks. As non-face-to-face and digital customers increase, 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 said, "Many savings banks in provincial areas have capital levels less than 1/100 of large savings banks," and predicted, "Ultimately, open banking will lead to a sorting out and reorganization of the savings bank industry."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
