Joining '4.5% Annual Interest' Products at TomBank... Internet Banks Launch Counterattack Against Commercial Banks

As major domestic commercial banks raised their savings and deposit interest rates by nearly 1 percentage point last month, internet-only banks have launched countermeasures to attract users.

Toss Bank announced on the 10th that it has launched a "Find the Financial Product That Suits Me" service. This service includes Korea Investment & Securities issued promissory notes, offering interest rates up to 4.5% per annum (fixed rate, pre-tax), which is among the highest in the industry. A promissory note is a type of deposit-like product where a fixed amount of money is placed as a time deposit and the principal and interest are returned together after a set period. This promissory note allows a deposit period of 6 months or 1 year for up to 50 million KRW. The interest rates are 4.3% for 6 months and 4.5% for 1 year. However, as this product is offered on a first-come, first-served basis, once the special offer limit is exhausted, the interest rates may change to 3.95% for 6 months and 4.15% for 1 year.

To subscribe to this product, an account with Korea Investment & Securities linked to Toss Bank is required. A Toss Bank representative said, "With the recent sharp rise in the base interest rate, interest in fixed-rate products, where the interest rate is set at the time of subscription like savings and deposits, is increasing," adding, "It is suitable for investors with a stable investment preference." Toss Bank also offers a ‘Create Securities Account’ service that allows users to open a securities account necessary for stock trading at securities firms.

Kakao Bank has strengthened its competitiveness in savings and deposit interest rates. Since the 5th, Kakao Bank has raised savings and deposit interest rates by up to 0.8 percentage points and lowered loan interest rates by up to 0.45 percentage points. Following this increase, the basic interest rate for the 'Parking Account' Safe Box became 2% per annum. With the interest rate hike, the 26-week installment savings account offers a preferential interest rate of 0.5 percentage points if automatic transfers are successful for 26 weeks, resulting in an annual interest rate of 3.5%. The 1-year fixed deposit interest rate is 3.1% per annum, and the 3-year fixed deposit is 3.6% per annum. For flexible installment savings, the preferential interest rate applies up to 3.5% per annum for 1 year and up to 4% per annum for 3 years.

K Bank has attracted users by conducting several special promotions for high-interest deposit products. In June, it held two events offering a 5% annual interest rate on the 'CodeK Flexible Installment Savings' (3 years), both of which sold out. Since last month, it has raised the interest rates on 'Main Transaction Preferential Flexible Installment Savings' and 'CodeK Flexible Installment Savings' by 0.4 to 0.6 percentage points.

These moves by internet-only banks are interpreted as strategies to capture users who are switching back to commercial banks. As commercial banks’ interest rates rise, large sums of money continue to flow into banks. As of the end of last month, the total savings and deposit balance of the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?was 750.5658 trillion KRW, an increase of more than 28 trillion KRW compared to the previous month. In contrast, Kakao Bank’s deposit balance as of the end of July decreased by 527.4 billion KRW from the previous month to 32.6534 trillion KRW.