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Korea to have its first online bank in January

South Korea will have its first fully online bank from early next year following the Financial Services Commision’s approval of the establishment of K-Bank on Wednesday.

The FSC endorsed a consortium of 21 shareholders including mobile carrier KT, Woori Bank, NH Investment & Securities, Hanwha Life Insurance, Hong Kong-based Alipay and other information technology startups to officially launch the online bank.

It is the first approval by the FSC for a new bank in the first-tier financial sector in 24 years, and the first for an internet-only bank.

K-Bank will be operated entirely on consumers’ smartphones and other mobile devices, allowing users to create a bank account in 10 minutes, transfer money and apply for a loan on their IT gadgets, without visiting a brick-and-mortar branch or submitting personal documents for identity certification.

The bank will run financial services 24 hours every day of the year, equipped with a machine-learning chatting service named “Chatbot” that will provide customer consultations.

It will also introduce loans with interest rates between 7 percent and 8 percent for consumers with a low credit rating who can only take out a loan with a minimum 15 percent interest rate, as they are marginalized by commercial banks for 2 to 3 percent loans. The bank will set its own credit rating system to filter healthy borrowers. KT will offer its subscriber database, which will include history of phone bill payments, on their consent, in order to help attract users to the bank. 

K-Bank CEO Shim Sung-hoon delivers a presentation about the new bank at the Seoul government complex in Gwanghwamun on Wednesday.
K-Bank CEO Shim Sung-hoon delivers a presentation about the new bank at the Seoul government complex in Gwanghwamun on Wednesday.

The preparatory corporation for the bank, currently with about 190 financial and IT specialists in its workforce, aims to launch the bank in late January at the earliest.

“K-Bank will start off with basic bank services for the first few months, and then expand into credit cards, debit payments, fund and bancassurance sales and other customized credit products within 2017,” said Shim Sung-hoon, CEO of K-Bank. “K-Bank will be the No. 1 mobile bank with total assets of around 15 trillion won a decade later.”

Since the financial regulator announced the introduction of mobile-oriented banks in June 2015 to boost growth of the fledgling fintech industry, the KT-led consortium and another by Kakao were formed in order to create such banks. Both were given preliminary approval in November last year and have been preparing for final approval up until recently.

The Kakao consortium is also working to apply for approval for its Kakao Bank by the end of this year.

However, bills to revise the current law separating banking and commerce by limiting a nonfinancial player’s shares with voting rights in a bank to 4 percent, are still pending at the National Assembly, which may hinder the launch of the new banks if not passed.

By Song Su-hyun (