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Digital banking in South Korea has dipped and then grown again over the past year, indicating that users in the country are still on the fence about performing financial tasks online.
According to recent data from The Bank of Korea, the country’s central bank, the number of digital banking users in South Korea totaled 54.2 million in Q1 2017. That was up from 53.7 million the previous quarter.
However, the number of digital banking users was unchanged from one year ago at 54.2 million. The number of South Korea’s online bank users dipped to a low of 51.9 million in Q2 2016 before rebounding the following quarter, and has seen slow growth since.
The Bank of Korea defined digital banking subscribers as those who had signed up for a digital banking account. Digital banking users were defined as those who had actually used a digital banking service, such as the transfer of funds, over the previous year.
Despite the tepid growth of digital banking in South Korea, there are signs that the government is warming up to the idea of online-only banking.
April 2017 marked the opening of the country’s first online-only bank, Kbank, a subsidiary of telecom KT Corp. The bank plans on using savings derived from its lack of brick-and-mortar locations to offer borrowers more appealing interest rates.
In addition, regulators gave Kakao Corp. final approval to open its own internet-only bank in early April. The new operation, dubbed Kakaobank, will be able to draw from a ready-made user base among KakaoTalk, the company’s popular messaging platform. The chat app, which has a penetration rate of nearly 100% among messaging service users in South Korea, already offers users a mobile payment service known as Kakao Pay. The service has proved to be popular: An estimated KRW1 trillion ($833.3 million) worth of transactions took place via Kakao Pay in Q3 2016.
The launch of Kakaobank will be a natural next step for these mobile payment service users. The Bank of Korea already reported that the number of smartphone banking users grew from 46.5 million in Q4 2016 to 48.7 million in Q1 2017. With K-Bank and Kakaobank emerging as digital banking options, expect those numbers to continue to grow.
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