South Korea formally launched an open banking service Wednesday to increase convenience and lower transaction costs for bank customers.

The new system enables bank customers to access nearly all banking services offered by any bank through a single smartphone application, including withdrawals and transfers, according to the Financial Services Commission.

Previously, 10 commercial banks, including KB Kookmin Bank, Shinhan Bank, Woori Bank and KEB Hana Bank, joined a preliminary service that began Oct. 30. On Wednesday, 16 more local banks and 31 fintech companies started offering the service to their customers. More local firms are expected to join the service after gaining financial authorities’ approval.

The banks have opened their payment system to fintech firms to enhance convenience and lower the cost of financial transactions for their customers. The open access lowers fintech firms’ transaction costs by nearly 90 percent.

To celebrate the launch, the FSC and the Korea Financial Telecommunications and Clearings Institute, a nonprofit organization that manages interbank payment systems here, held a ceremony in Seoul.

Major service providers -- KB Kookmin Bank, NH Bank, Shinhan Bank, Woori Bank, KEB Hana Bank, Finnq, December & Company, Kakao Pay, Viva Republica and E9pay -- participated in the event and introduced their open banking services.

Business representatives accompanied FSC Chairman Eun Sung-soo around the experience booths and tried using the service. Eun highlighted the importance of financial innovation, saying the open banking service would hopefully be a leap forward for the industry.

According to the FSC chief, over 3.1 million people joined the service and 7.7 million accounts were created within just 50 days after launching the preliminary service.

The financial authorities have pinned their hopes on the service to level the playing field for both banks and fintech companies. They expect local banks to accelerate the transition to banking as a platform, and fintech firms to use payment system to lower prices without establishing strategic alliances with banks.

“The future of finance will be for all financial sectors to participate in open innovation. With low-cost but high-efficiency infrastructure, financial institutions have to compete with each other to provide better service to their customers, rather than paying attention simply to increasing the number of customers,” Eun said in a congratulatory speech.

Kim Hak-soo, president of the Korea Financial Telecommunications and Clearings Institute, also said open banking would be a new financial platform and would become the center of the new service and financial products’ distribution networks.

“To provide a better open banking service, we will further foster various complementary measures from participating institutions, along with our over 30 years’ experience of running joint financial networks,” Kim said.

By Jie Ye-eun (yeeun@heraldcorp.com)