Preference for 'Safe Assets' Amid Base Rate Hike and Asset Market Volatility
Toss Bank Offers 2% Interest Unconditionally... Signal of Competition
Internet Banks and Commercial Banks Also Launch High-Interest Special Promotions
[Asia Economy Reporter Kim Jin-ho] Office worker Kim Taekyun (35, pseudonym) recently signed up for deposits at Toss Bank and the First Salary Dream Installment Savings product at Shinhan Bank to accumulate a lump sum of money. Kim, who has been working for six years, had actively invested in asset markets such as stocks and cryptocurrencies, but after suffering significant losses due to recent unstable market conditions, he decided to switch to investing in safe assets. Although the returns are lower compared to stocks, the principal is guaranteed, and the interest rates have increased compared to before, making it suitable for the purpose of accumulating a lump sum.
Consumer interest in bank deposits and installment savings, which had been overlooked as investment options during the prolonged low-interest-rate period, is reviving. This is due to the Bank of Korea’s normalization of monetary policy leading to higher deposit interest rates, as well as the spread of a preference for safe assets amid stock market instability. The recent launch of Toss Bank offering high-interest products without conditions is also seen as a trigger for sparking interest in interest rate competition.
According to the financial sector on the 18th, among major commercial banks and internet banks, Toss Bank offers the most attractive deposit interest rates. Toss Bank’s deposit products feature a 2% interest rate with no conditions. Interest is provided for the exact number of days the money is deposited, even if it is just for one day, and benefits are available even if the account is terminated early.
Due to these exceptional benefits, consumer response has been enthusiastic. Toss Bank’s pre-registration customers have reached about 1.6 million. Currently, around 400,000 to 500,000 new accounts have been opened, and Toss Bank plans to complete account openings for the remaining approximately 1 million pre-registered customers within this month.
Internet banks launched earlier, such as Kakao Bank and K Bank, also offer relatively higher interest rates compared to commercial banks. Since the 1st of this month, K Bank raised the interest rate on its ‘Code K Time Deposit’ to 1.5%. Following the base rate hike announcement in August, it had previously increased deposit interest rates by 0.2 percentage points. Kakao Bank raised deposit and installment savings interest rates by 0.3 to 0.4 percentage points last month. For deposits, it offers 1.5%, and for installment savings, 1.8% interest when automatic transfers are set up.
Commercial banks have also recently introduced high-interest deposit products one after another. IBK Industrial Bank launched the ‘IBK Altos Installment Savings,’ a flexible installment savings product that offers preferential interest rates based on the performance of the Altos volleyball team in the ‘Dodram 2021?2022 V-League.’ The contract period is one year, with a maximum monthly deposit of 500,000 KRW, and sales are limited to 50,000 accounts until the end of the year. The basic interest rate is 1.00% per annum, with a maximum preferential interest rate of 2.00 percentage points, resulting in a top interest rate of 3.00% per annum.
Shinhan Bank is selling the ‘First Salary Dream’ installment savings product targeting office workers. This product offers preferential interest rates to customers who transfer their salary, with a high interest rate of up to 4.40% per annum. It is popular because not only new employees but also customers who switch their salary accounts can receive preferential interest benefits. Hana Bank offers up to 3.5% compound interest annually for new employees aged 35 or younger who subscribe to the ‘Salary Hana Monthly Compound Interest Installment Savings,’ depending on card usage performance.
Although somewhat demanding, products offering up to 7% annual interest rates if conditions are met are also noteworthy. Woori Bank’s ‘Woori Magic Installment Savings by Lotte Card’ guarantees up to 7% interest depending on Woori Bank transaction performance and Lotte Card usage. For customers who mainly use Lotte Card, this product is naturally very attractive. K Bank is also selling the ‘Hot Deal Installment Savings x Woori Card’ product in partnership with Woori Card, offering a basic interest rate of 1.8% plus a maximum preferential interest rate of 8.2%, totaling a high interest rate of 10%.
A bank official said, "As the base rate is likely to rise further due to the normalization of monetary policy, it is better to subscribe to one-year deposit and installment savings products rather than long-term deposit products," adding, "We expect consumer demand for deposit products, which had been overlooked in the low-interest-rate environment, to increase."
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