[THE INVESTOR] The rules and regulations for Internet-only banks will be revised to help kick-start the sector, the financial regulator said on July 6.

Kbank, led by mobile services operator KT Corp., and Kakaobank, controlled by Korea Investment Holdings, are beefing up their preparations to obtain final approval from the Financial Services Commission in the third and fourth quarter, respectively, with an aim to begin operations within this year, the regulator said in a statement.

The final approval will bring newcomers to the fourth-largest Asian economy’s banking scene for the first time in 24 years.

“We are mending the business environment for Internet-only banks. In January, we made a revision to the rules to allow them to do the credit card business as well even if they don’t have more than 30 outlets and hire more than 300 workers,” FSC chairman Yim Jong-yong said in a press conference held during his field visit to Kakaobank’s preparation office in Pangyo, just south of Seoul.

If Internet-only banks are fully ready to run credit card, insurance and financial investment businesses in terms of staff and systems, they can directly apply for final approval to have multiple businesses without the process for an initial approval, Yim said.

In other efforts, the government plans to have the Korea Credit Information Services (KCREDIT) provide customers’ credit information at microfinancing companies to the Web-only banks. It is to allow the new banks to extend mid-rate loans to low-rate customers, the FSC chairman said.

“Even before a final go-ahead, we will also help the online banks test their computing systems in connection with KCREDIT, the Bank of Korea and the Korea Financial Telecommunications & Clearings Institute. Multiple tests will guarantee the banks start their businesses with a relatively stabilized system,” the chairman said.

But Yim didn’t paint a rosy picture for the future of Internet-only banks.

Their mid- and long-term competitiveness depends on whether they can offer “killer content” that differentiate themselves from existing banks, he said.

In late November, the government granted preliminary permits to the two Web-only banks as it seeks to reinvigorate the banking sector suffering from slow growth and slim margins. It expects online-only banks will be able to offer not only traditional financial services but also fintech-based innovative services that existing commercial banks can‘t offer through mobile platforms.

In fact, the Internet and mobile banking sector has emerged as new economic growth drivers in recent years as consumers increasingly prefer convenient deals on mobile devices to visiting offline branches.

Threatened by the planned launch of Internet-only banks, existing ones have bolstered their mobile banking services in order not to lose customers. The FSC chief called the banks’ move “positive signs of sound competition and tension in the making” in the markets.

(theinvestor@heraldcorp.com)