[Asia Economy Reporter Song Seung-seop] Interest is growing in the launch of special savings and deposit products ahead of the savings banks' open banking service, which is expected to begin as early as March. The savings bank industry is expected to target a new market by offering more aggressive interest rate conditions than commercial banks.
Savings Banks Attract Open Banking Customers with High-Interest Products
According to the savings bank industry on the 30th, among the five major savings banks?SBI, OK, Welcome, Korea Investment, and Pepper?more than three are preparing various promotions, including special savings and deposit products, ahead of the open banking service expected to start as early as March.
The exact period is undecided, but most related products are expected to be launched around the start date of the open banking service. Some companies are considering launching products proactively within two weeks. Considering that special product interest rates have typically been set 1-2 percentage points higher than existing rates, it is likely that the rates will be decided not to exceed 5%.
Open banking refers to a service that allows the use of all accounts through a single application (app). It is a technology that standardizes and opens up banks' remittance and payment networks, and as of the end of last year, it had 59 million (duplicated) subscribers and 96.25 million registered accounts, indicating its popularity.
Savings banks have been upgrading their digital infrastructure since mid-last year by revamping their apps and strengthening security capabilities to introduce 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 app ‘WelBank 3.0’ 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.
Nevertheless, the reason for preparing large-scale promotions with the launch of open banking is analyzed to be the position of a latecomer that must catch up with commercial banks. Additionally, as securities companies and card companies are also expected to participate in open banking, savings banks need incentives to attract customers. In fact, commercial banks are actively working to retain existing open banking subscribers by revamping their apps and holding various prize events. Card companies and securities firms are also marketing by highlighting advantages such as easy payments, making competition in the open banking market even fiercer.
Industry: "Deposits Ultimately Depend on Interest Rates"… No Loss Even if Effectiveness is Low
The industry expects that combined with the high interest rates of savings banks, there will be a strong effect in 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 will be competitiveness as there is high demand to earn even 1% more interest." 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 to expect an increase in the influx of the 20s and 30s age group, who mainly use products such as parking accounts (checking accounts, savings accounts, corporate free deposit accounts) that pay interest even if deposited for just one day. The deposit interest rates for savings bank parking accounts range between 1.5% and 2.0% annually, higher than those of commercial banks or securities firms' CMA accounts. Since parking account users frequently make deposits and withdrawals for purposes such as temporarily holding funds for stock trading, they could become open banking subscribers.
The savings bank industry holds the view that even if such marketing strategies do not produce immediate noticeable effects, there is little to lose. Even if the number of savings bank open banking subscribers is lower than expected, it is still profitable for savings banks if their accounts are frequently accessed through commercial bank apps. An industry official said, "It is true that some savings banks currently have inconvenient apps and low 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, it is pointed out that not all savings banks will benefit from open banking. Participation in open banking requires various network systems and app development, which small and medium-sized savings banks with low capital cannot afford. As non-face-to-face and digital customers steadily increase, there is an analysis that open banking services will initiate a ‘sorting out’ centered on large firms.
A financial industry official said, "Among savings banks in provincial areas, many have capital less than 1/100 of that of large savings banks," and predicted, "Ultimately, open banking could lead to a reorganization of the savings bank industry through sorting out."
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