The coronavirus pandemic has accelerated the digitalization of the financial industry, pushing local banking groups to cater services to require less contact. The heated competition to gain a digital foothold in the industry pose as a key task for the firms this year, experts and head of the groups said Monday.
“Local banks must bolster their risk management, while seeking for fresh revenue sources in the era of near-zero interest rates and improve the competitiveness of their digital channels,” Suh Byung-ho, a senior researcher of the Korea Institute of Finance said in a report released Sunday.
“With big tech and fintech firms taking over personal data, credit information and payment services, the traditional sales channels of local lenders could be rattled,” he added.
Suh referred to the scheduled launch of the state-supported “My Data” services or personal credit information management services in February. The services will allow tech firms such as Naver and Kakao to gain access to data exclusively handled by traditional financial institutions. Because of this, tech firms will have an advantage in utilizing big data to offer customized options to customers.
My Data aims to collect and integrate personal financial transaction information scattered across banks, credit card issuers, insurers, and other financial services, for both the benefit of consumers and firms.
It is in line with the passage of three bills intended to ease regulations on the use of personal information in January last year.
The KIF’s concern for traditional lenders are reflected in several financial institutions’ decision to outsource their cloud and data services to fintech firms in designing their businesses related to My Data. NH NongHyup Bank, Standard Chartered Bank Korea and KB Kookmin Card -- KB Financial Group’s credit card unit -- have decided to utilize cloud services provided by either Naver or Amazon.
On top of it, the market is gearing up to welcome the nation’s third internet-only bank Toss Bank, which is expected to begin operation after its operator Viva Republica and its consortium gains final approval for license in the first half of this year. The online-only banks - Kakao Bank and K bank -- have been gaining popularity here, offering tech-savvy mobile services to customers. Kakao Bank has already secured over 12 million users. Banks at crossroads
Addressing the need to improve their digital capabilities, heads of major banking groups called for digital transformation in their New Year messages.
Shinhan Financial Group Chairman Cho Yong-byoung said that Shinhan’s fate now hinges on the group’s digital transformation efforts and vowed to team up with tech firms for further digital drive.
“In accordance with the digital leadership system that the group implemented last year, leaders and employees across different affiliates at home and abroad should gear up for digital innovation,” Cho said.
“Our own efforts to accomplish digital innovation do have limitations. We have to cooperate with local fintech and big tech firms, while making bold investments in digital startups with tech prowess,” he said.
Woori Financial Group Chairman Sohn Tae-seung mentioned My Data services in highlighting the need to improve the firm’s own digital service.
“As new digital financial services like My Data -- a business model that offers integrated management of personal credit information such as banking transactions or credit card records -- and MyPayment businesses which allow a fintech company provide payment service will be increasingly launched this year, more fintech and big tech firms are likely to compete with us over financial innovation,” Sohn said.
“The group should innovate the current digital banking platforms by employing cutting-edge technologies such as artificial intelligence or big data.”
Hana Financial Group Chairman Kim Jung-tae pinned high hopes on digital platform business, saying this year would mark a business inflection point.
“Business decision at the group’s strategic inflection point will determine changes that will occur in the next decade. Platforms are where multiple service providers and consumers meet and create great values. We need to build our own finance platforms that offer a range of benefits to consumers by partnering with various digital platform operators in the market,” Kim said.
Kim also urged its employees to have a global mind-set when making corporate decisions or conducting business activities, in a bid to expand the group’s market presence.
KB Financial Group Chairman Yoon Jong-kyoo pledged to grow the banking giant to the nation’s No.1 financial platform company.
“By implementing various high-tech based platforms offering personalized customer management services, the group should become the most-beloved finance partner in the market,” Yoon said.
“In response to the movement of big tech into traditional financial services, (KB Financial) will ramp up its expansion of business areas, from selling of banking products to collective asset management services. Also, the group is planning to expand its workforce in charge of digital transformation tasks and nurture talented employees at core divisions like investment banking and capital market,” he added.
NH NongHyup Financial Group Chairman Son Byung-hwan, who was tapped to lead the banking giant in December last year, vowed to take a lead in digital finance, while seeking new growth synergy between the group and agricultural communities.
“NH Financial will continue to gain upper hand in digital financing by operating a competitive digital financial platform this year,” Son said.
“Through business partnerships with fintech and big tech companies, the group will develop new business models employing new technologies, including open banking system and My Data," he added.
In addition, Son called the group’s affiliates to seek new business sectors with high potential to play a key role in supporting the agricultural community’s growth.
By Jung Min-kyung & Choi Jae-hee (email@example.com