Targeting Interest Rate Nomads Watching Closely... Internet Banks Compete in Parking Account Battle

[Asia Economy Reporter Boo Aeri] As interest rates on deposits at commercial banks have stalled, the number of 'interest rate nomads' waiting for rates to rise is increasing. Internet-only banks are competing by launching demand deposit accounts (parking accounts) targeting these customers.

According to Toss Bank on the 13th, from that day, Toss Bank accounts will offer an annual interest rate benefit of 4% on amounts exceeding 50 million KRW. Amounts up to 50 million KRW will receive the existing 2.3% annual interest. Toss Bank accounts are demand deposit accounts that allow customers to deposit and withdraw money at any time.

Toss Bank also removed the previous limit where only 0.1% interest was provided on amounts exceeding 100 million KRW. For example, if 200 million KRW is deposited in a Toss Bank account, 4% interest is paid on 150 million KRW, and 2.3% interest is paid on the remaining 50 million KRW. Considering that major commercial banks' fixed deposit interest rates are in the high 4% range, this is a remarkable interest rate for a parking account.

Toss Bank also raised the interest rate on its regular installment savings product, 'Kiwoobwayo Jeokgeum,' by 0.5 percentage points. Customers can enjoy up to a 4.5% annual interest rate benefit upon maturity. However, the increased interest rate benefit applies only to new installment savings customers from the 13th.

A Toss Bank official said, "Although market funds are flowing into bank deposit and installment savings products, high interest rates can only be obtained by meeting preferential conditions. We have solved customers' difficulties by combining the high interest rates expected from deposit products with the convenience of demand deposit accounts."

K Bank also raised the interest rate on its parking account the day before. The interest rate on K Bank's parking account, 'Plus Box,' was increased by 0.3 percentage points from 2.7% to 3.0%. Plus Box is a product that allows customers to store money and withdraw it anytime for use in deposits, installment savings, investments, etc. Interest is applied even if the money is deposited for just one day.

K Bank is also offering benefits using its 'Gibun Account,' a type of parking account, until the 25th. If customers write a wish in the message section of the Gibun Account and deposit the desired amount, 10 people will be selected to receive a gift equal to 100% of the maximum amount. The maximum gift amount is 1 million KRW.

However, Kakao Bank currently has no plans to raise the interest rate on its parking account. The interest rate on Kakao Bank's demand deposit account, Safe Box, is currently around 2.60% per annum.

Some express concerns about the moves by internet-only banks amid financial authorities' calls to refrain from competing on deposit interest rates. A financial industry official said, "Since everyone is hesitant to raise rates, there is a possibility that commercial banks may push back against the moves by internet-only banks." However, internet-only banks maintain that the increase in parking account interest rates will not affect the overall trend. An internet-only bank official said, "Since there is a big difference in asset size compared to commercial banks, the impact on the financial market will not be significant."