Four Major Commercial Banks See Online Financial Products Exceed 70% on Average
Contactless Transactions Accelerate Due to COVID-19 and Financial Consumer Protection Act
Bank Branch Closures Expected to Speed Up Further
[Asia Economy Reporter Kim Jin-ho] It has been revealed that 7 out of 10 customers subscribing to financial products such as loans and deposits at major commercial banks utilized 'online channels.' This is analyzed to be due to the acceleration of non-face-to-face transactions caused by COVID-19 and the implementation of the Financial Consumer Protection Act (FCPA), which led consumers to prefer the easier-to-join online channels. Accordingly, the closure of bank branches and the shift to digitalization in the banking sector are expected to accelerate further.
According to the financial sector on the 3rd, the proportion of online sales of financial products at major commercial banks such as Shinhan, Woori, Hana, and IBK Industrial Bank of Korea exceeded an average of 70% as of the end of April. This is interpreted as the 'digital channel enhancement' strategy, which banks have been diligently pursuing for years, showing its effectiveness. Non-face-to-face channels such as internet and mobile banking are becoming popular among the middle-aged and older customer base, which is the main clientele of banks.
Among loan products, Hana Bank had the highest online sales proportion at 88%. Shinhan Bank also showed that 6 out of 10 customers (60.6%) subscribed online instead of offline. IBK Industrial Bank of Korea, whose main customers are small and medium-sized enterprises, also reached an online subscription rate of 82.2%. Woori Bank is reported to have increased its proportion by about 5 to 8 percentage points compared to the end of last year.
The increased reliance on online channels is similar for deposit products. No bank had an online subscription proportion below 50% based on the number of subscriptions. Hana Bank was the highest at 75%, followed by Shinhan Bank (70.6%) and IBK Industrial Bank of Korea (56.9%).
The proportion of online sales of financial products at major banks has been increasing more rapidly this year. Most major commercial banks have raised their online sales proportion by an average of 5 to 10 percentage points compared to the end of last year, further widening the gap with offline sales proportions.
The primary cause is first attributed to the spread of non-face-to-face transactions due to COVID-19. As the number of customers visiting branch offices sharply decreased, banks rushed to introduce non-face-to-face exclusive loan and deposit products. Not only unsecured loans but recently, banks offering 100% non-face-to-face sales of mortgage loans have been emerging one after another. Deposit and savings products offering preferential interest rates when subscribed through non-face-to-face channels such as apps have also noticeably increased.
The introduction of the FCPA, which complicated face-to-face subscription procedures, is also believed to have had an impact. Banks encourage online subscriptions due to the workload at counters, and consumers are increasingly perceiving that subscribing at counters is inconvenient.
Meanwhile, as consumers' non-face-to-face transactions accelerate, the closure of bank branches is also expected to speed up. According to statistics from the Financial Supervisory Service, the number of bank branches was 6,405 at the end of last year, down by 304 from a year earlier. Major banks are also accelerating the consolidation of branches centered on key locations this year.
A financial sector official explained, "As consumers' non-face-to-face transactions increase significantly, the digitalization trend of banks has now firmly established itself as the mainstream," adding, "The consolidation of bank branches to streamline operations can also be seen as part of this digital transformation."
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