Unique Products Attract Attention Amid Ultra-Low Interest Rates and Industry Competition
Used as a Means to Capture Customers Ahead of Open Banking
[Asia Economy Reporter Song Seung-seop] Amid the ultra-low interest rate environment, the savings bank industry is steadily introducing unique products. As non-face-to-face and digital finance become more prevalent, making relational sales difficult, banks are using distinctive products to attract customers.
According to the industry on the 23rd, JT Chin-ae Savings Bank operates the ‘Jjeom People Plus’ installment savings account, which customers can join by presenting a photo taken with their pet dog. It offers an annual interest rate of 3.0% and features the pet dog's name recorded on the passbook.
Seram Savings Bank’s ‘My Designed Savings’ allows customers to create their own product name. There are a total of 11 preferential conditions, with interest rates increasing by 0.1 percentage points for every 2 to 3 conditions met, up to a maximum of 0.5%.
There are also products linked with insurance that offer interest rate benefits. DB Savings Bank’s ‘Dreambig Regular Savings’ raises the interest rate up to 6.9% if customers subscribe to automobile insurance through its affiliates. Woori Financial Savings Bank’s ‘SamSamOoh Together Made Savings’ applies a 1.5 percentage point preferential rate if bancassurance is maintained for 3 months. Customers can deposit up to 500,000 KRW per month, and if five or more people join simultaneously, the interest rate can increase up to 4.1%.
Parking accounts that pay interest even if deposited for just one day were also unique products, but as the craze grew, companies have been rushing to launch them. This month alone, Pepper Savings Bank and Sangsangin Savings Bank released parking accounts. Both products pay interest rates around 2% annually, similar to the savings bank’s disclosed installment savings rate (2.42%). In the case of Sangsangin Savings Bank, deposits of 50 billion KRW were gathered within just three days of launch.
Utilizing 'Unique Products' to Attract Customers Amid Low Interest Rates and Open Banking
Savings banks originally focused on relational sales by promoting high-interest accounts to customers visiting their local branches. However, with the expansion of digital finance demand and the continuation of the low interest rate environment, the appeal of interest benefits has diminished. Professor Sung Tae-yoon of Yonsei University’s Department of Economics explained, "The differentiation of special interest rate promotions, which the industry relied on, is no longer effective," adding, "Savings banks, lacking sales tools, inevitably need products specialized for consumers."
There is also analysis that these efforts are attempts to secure customers ahead of the implementation of open banking. Open banking is a service that allows the use of all financial institutions’ accounts through a single application (app). It is scheduled to start as early as next month, with the network construction work nearing completion. The industry needs customer acquisition methods not only to compete within the sector but also to catch up with commercial banks that have already launched open banking.
Some have pointed out that there is little effect on operating profits. A representative from a savings bank that does not operate unique products said, "Unique products have the effect of raising brand awareness at the initial launch," but added, "It is difficult for them to account for a significant portion of profits."
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