[Inbaeng, Bubble vs Innovation]②Once Fresh... Now 'Same Old Same Old'

Emerging with Convenience... Leading Changes in Commercial Banks
Strengthening Partnerships and Emphasizing Platforms, but Differentiation 'Questionable'

[Asia Economy Reporters Minwoo Lee and Baeri Boo] The emergence of internet-only banks has prompted traditional banks to adopt a more user-friendly approach with heightened awareness. While the financial sector has begun to shift and compete with a user-centric focus, there is a growing sentiment that there is little differentiation among the internet-only banks themselves.

According to KakaoBank on the 11th, the current number of customers stands at around 20 million. This is an increase of about 830,000 from 19.17 million at the end of the second quarter this year. Compared to the 240,000 customers on its launch day in July 2017, this represents nearly an 83-fold increase. K Bank surpassed 7 million customers at the end of last year and recorded 8.08 million as of the end of last month, adding over 1 million customers this year. Toss Bank reached 5.04 million customers by the end of October, surpassing the 5 million mark. Arithmetically, more than half of the entire population is using internet-only banks.

All three emphasize 'simplicity' compared to traditional banks, but their expansion strategies differ. KakaoBank highlights financial services based on its powerful platform, K Bank focuses on partnerships across various industries, and Toss Bank, launched in October last year, is concentrating on market penetration through various experimental services and products.

The Pioneer KakaoBank Targets Both Platform and Banking

KakaoBank, the first internet-only bank to turn a profit, emphasizes platform competitiveness and business diversification. Its platform includes KakaoBank Mini for teenagers, brokerage account opening services, partner-linked loans, co-branded credit cards, and an advertising platform. This is interpreted as a strategic move to target future generations rather than customers who are currently profitable. Recently, KakaoBank signed a contract with the virtual asset exchange Coinone to open real-name accounts and launched a large-scale promotional campaign, which is seen in the same context.

The bank is also focusing on its core banking functions such as deposit and loan products. It offers deposit products like checking accounts, Safe Boxes, piggy banks, and 26-week installment savings, while recently launching numerous services for individual business owners. The plan is to leverage simplicity to target everything from account opening to loans. Without the need to install a separate application, users can access both personal and individual business banking through the KakaoBank app, eliminating various document submission processes and fees. In the long term, the bank plans to increase the proportion of secured loans such as mortgage loans and jeonse (key money) deposit loans.

Speed Race Ahead of IPO... Aggressive Partnerships & Sales

K Bank has prioritized aggressive partnerships and competitive interest rate policies. Initially, its market foothold was secured through a partnership with Upbit, the industry-leading virtual asset exchange. By exclusively issuing new real-name accounts for Upbit customers, K Bank was able to secure stable deposit balances and customer numbers. Within two months of the partnership, new customers reached 1 million.

As a result, K Bank recorded its first annual profit last year and has continued its profit streak. In the third quarter of this year, it posted a net profit of 25.6 billion KRW, marking the highest quarterly performance to date. This represents a 52.4% increase compared to the same period last year and a 20.2% increase from the previous quarter, achieving five consecutive profitable quarters since the third quarter of last year.

K Bank is pushing a strategy of forming partnerships with various industries following Upbit. It has already partnered with Mirae Asset Securities, Lotte Card, and Danggeun Market’s Danggeun Pay. Additionally, it has engaged in aggressive product competition by raising the interest rate on one-year fixed deposits to 4.6% per annum and increasing the interest rate on its demand deposit product, the 'Plus Box' parking account, to 2.7%, the highest level among traditional banks.

'Selection and Focus'... Toss Bank Concentrates on 'Distinctiveness'

Toss Bank, the last to launch among internet-only banks, faces the most urgent need for differentiation. While K Bank focuses on product competitiveness and KakaoBank leverages its powerful platform influence, Toss Bank has not concentrated on expanding its product lineup.

Instead, it has strived to discover services not seen in existing banks or other internet-only banks. A representative example is its service that pays interest daily, allowing customers to receive interest whenever they want, not on a monthly basis. From the user's perspective, this offers the benefit of compound interest and the satisfaction of receiving interest daily. Toss Bank’s pioneering approach has led to a parking account competition across all banks. Among the three internet-only banks, Toss Bank was also the first to launch individual business loans.

The 'one-app' strategy that leverages synergy with Toss affiliates is also prominent. Instead of having separate applications for banking, insurance, securities, and other services, all are integrated under the umbrella of financial services. This demonstrates confidence that all financial activities can be conducted within the Toss ecosystem. Toss Bank also places importance on app engagement. The experimental introduction of features like chat and bulletin boards is interpreted as an effort to keep users engaged.

Familiar Simplicity... Users Desire Another Innovation

Experts and industry insiders point out that the distinctiveness and new wave that internet-only banks initially brought have gradually faded. In the case of KakaoBank, it seemed to create a social culture with its simple usability and the Friends character check card craze, but after five years, it is difficult to feel a difference from regulated banks. A financial sector official commented, "KakaoBank, as the pioneer, still holds symbolic value, but K Bank feels somewhat more conservative even in its organizational culture, and although Toss Bank promotes 'innovation,' it does not seem to have any special weapon to surpass KakaoBank."

Professor Jeong Hyun Wi of Chung-Ang University’s Business Administration Department said, "As traditional banks have improved convenience, the initial innovation that internet-only banks promoted has already lost its significance. Moreover, with the advent of a high-interest-rate era, even interest rate competitiveness has disappeared, making differentiation difficult. Since regulated banks are also targeting younger generations and launching counterattacks, how internet-only banks respond will be crucial."