South Korea gave preliminary approval for two groups -- one from the new economy and another from the old, and both with Chinese partners -- to set up the nation’s first Internet-only banks as the government seeks to reinvigorate a sector suffering from slow growth and slim margins.
Kakao Corp., operator of Korea’s leading messaging app KakaoTalk, and KT Corp., the former government phone monopoly, were chosen from a field of three applications. A group headed by online retail operator Interpark Corp. was unsuccessful. The approvals will be finalized after the National Assembly passes legislation allowing Web-only banks to operate, according to a joint statement from the Financial Services Commission and Financial Supervisory Service.
Establishing Internet-only banks “should inject healthy competition in the local financial market and improve the financial industry,” Yim Jong Yong, chairman of FSC, said in the statement.
Korea’s government is offering the online-banking permits in a bid to drive innovation and deregulation in a sector that’s crucial for financing the country’s economic expansion. Online-only banks will be able to offer a wider range of customer services from existing commercial banks and offer easier access to credit for start-ups and small businesses, the statement said. Korea is lagging behind China, Japan and the U.S. in the development of web-based financial services.
Kakao’s group includes a 50 percent stake from Korea Investment Holdings Co. and a 10 percent holding from Kookmin Bank, the regulators said. Tencent Holdings Ltd., the operator of China’s WeChat service is affiliated with one of Kakao’s partners, while Alipay, the online payment arm of Jack Ma’s Alibaba empire, is among KT Corp.’s partners, according to an FSC official who declined to give their name citing internal policy.
Other KT group members include Woori Bank, GS Retail, Hanwha Life Insurance and Danal Co., all of which have 10 percent holdings.
KT said in an e-mailed statement that it is looking forward to facilitating the growth of Korea’s financial industry. Kakao will offer innovative services that existing banks can’t offer through mobile platforms when Kakao Bank is launched, the messaging company said in an e-mailed statement.
The regulator said it evaluated the bidders’ business plans, capital structure, investors and capabilities when deciding which would receive licenses. (Bloomberg)