South Korean banks are being forced to close down branches amid increasingly digitalized banking systems and moves from tech firms to jump into the competition, according to industry watchers.
A total of 119 branches of the nation’s top four banks were shuttered this year, related figures showed on Tuesday. Kookmin Bank shut down the largest number of branches at 49, followed by 43 by Shinhan Bank, 18 by Hana Bank and nine by Korea Exchange Bank.
“Banks are downsizing as more customers are using mobile and other online forms of banking services,” said Seo Byung-ho, a financial industry researcher at the Korea Institute of Finance. Persistently low performances amid a prolonged economic slowdown is another reason, he added.
The use of mobile banking services has risen 1,600 percent for the last five years, according to the Bank of Korea. The use of Internet banking services has increased 142 percent in the same period.
“Around 90 percent of users who transfer money and check their balances use either mobile and online banking services or go to automated teller machines rather than visit the bank in person,” said Yang Ah-ra, an official on the Bank of Korea’s Electronic Finance Team.
“With this trend expected to continue, banks should restructure their work from simple deposit and lending activities into more sophisticated private banking services,” Seo said.
Meanwhile, the latest moves from tech firms to jump into the financial sector is another threat to banks.
“With tech companies’ ambitiously expanding their financial business, the close of bank branches is just a prelude to what’s coming,” said Lee Young-hwan, a professor at Konkuk University’s IT Finance department.
“They are initially dealing with money transfers. However, for the longer term, they would expand their financial business into more sophisticated financial products such as funds and insurance,” he said.
Following the nation’s most popular messaging app Kakao unveiling its “Bank Wallet Kakao” mobile payment services last month, Naver, Korea’s largest Internet content service operator, also reportedly plans to launch a similar “Line Pay” service this month.
Samsung Electronics is also increasing its partnership with credit card companies to expand the use of its digital wallet service, “Samsung Wallet.”
By Shin Ji-hye (firstname.lastname@example.org)