Woori Bank headquarters in central Seoul. (Woori Bank)

Woori Bank, a major commercial lender in South Korea, has entered the competition to secure a license for the country's fourth internet-only bank.

An official from Woori Bank confirmed Tuesday that the company recently submitted a letter of intent to Korea Credit Data to join the firm's consortium to win approval to launch an internet-only bank. This marks the first time a local commercial bank has officially delivered its commitment to join the race.

"Woori Bank has consistently supported local merchants and small business owners. We have decided to participate in the consortium for the fourth internet-only bank to contribute to fostering a financial ecosystem that empowers small business owners," stated the official.

The consortium, tentatively named KCD Bank Consortium, is one of four contenders vying for approval to establish Korea's fourth internet-only bank, following K bank, Kakao Bank, and Toss Bank. Alongside KCD Bank, U-Bank, Soso Bank and Douzone Bank consortiums are also in contention.

In line with the local authorities' drive for financial innovation and inclusion via the expansion of digital lending platforms, these potential contenders are focused on specializing in financial services tailored to the needs of small- to medium-sized enterprises and micro enterprises.

KCD, the operator of the business solutions platform Cashnote, stands out as a formidable competitor in small enterprise data. Cashnote is used by 1.3 million micro-enterprises, offering various management and credit information services to approximately 2 million small business owners. Moreover, the company established Korea Credit Information, the country's first credit agency specializing in individual business in 2022, offering evaluation models to multiple financial institutions based on individual business owners' data.

If Woori Bank successfully joins KCD's consortium and secures the license, it would mark the commercial bank's second investment in an online-only lender. Woori currently holds a 12.6 percent stake in K bank.

Industry experts highlight that collaboration with a commercial bank or a prominent financial institution will be a crucial factor in securing the license. While the law stipulates a minimum capital requirement of 25 billion won ($18.2 million) for establishing an internet-only bank, industry insiders believe significantly more capital will be necessary for effective operations.

Shinhan Bank is also contemplating entering the competition by investing in the Douzone Bank consortium, initiated by enterprise resource planning software provider Douzone Bizon.

In July 2023, the regulatory Financial Services Commission announced plans to lower the bar into the internet banking sector, sparking intense competition among potential entrants. Authorities are currently reviewing revisions to the standards for license approval and are anticipated to announce them soon.

This latest move to join the internet-only bank consortium coincides with Woori Bank's efforts to diversify its business portfolios. The bank recently announced the establishment of a new committee dedicated to developing and promoting new businesses, under the direct supervision of CEO Cho Byung-kyu. According to an official from the bank, this committee will oversee the initiative once Woori officially joins the KCD Bank consortium.