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Online-Only Banks Coming Soon to South Korea

Two new digital banks are in the works

January 4, 2017 | Retail & Ecommerce

The year 2017 is likely to mark the opening of South Korea's first online-only bank. The new company, K-Bank, not only is the country's first exclusively digital financial institution, it's also the first new bank to open in South Korea in 24 years.

Types of Mobile Payment Services Used by Mobile Payment Users in South Korea, April 2016 (% of respondents)

But K-Bank probably won't be alone in the market for long. Kakao Corp., which owns South Korea's dominant messaging app, Kakao Talk, has preliminary approval to open an online bank as well.

Mobile features will be key to the success of any new bank offering in South Korea. The country has long been a leader in mobile use. eMarketer estimates that 70.4% of the population in South Korea uses smartphones, a level surpassed only by three other countries in the world.

Consumers will be able to open a K-Bank account using a smartphone or other mobile device. Clients will then be able to transfer money and apply for a loan using mobile devices.

While K-Bank is a new enterprise, it is aligned with some of South Korea's largest companies. According to South Korean news site Pulse, telecom giant KT Corp. will own an 8% stake, and GS Retail, an arm of the vast GS conglomerate, will own 10% stake, as will Woori Bank and Hanwha Life Insurance, both major financial institutions.

For all of K-Bank's powerful backing, a Kakao-branded bank has some ready-made advantages. Kakao Talk claims a user a base of 42 million monthly active users—that's in a country with a population of 51.5 million—and Kakao already offers a mobile payments service, Kakao Pay, that lets users link their credit or debit card to an account from which they can pay bills and transfer money within Kakao Talk. Since its September 2014 launch, Kakao Pay has garnered 13 million subscribers as of Q3 2016, with some SKW 1 trillion ($833.3 million) worth of transactions taking place on the platform during that time period.

—Jeane Y. Han

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