Originally, people had to visit a bank to do something. However, as the internet and mobile phone technologies developed, internet banking and mobile banking became possible, which enabled simple remittance services without having to visit the bank. Now, Internet-only banks that can do all the work easily through the internet without a store have emerged. This Internet-only bank has brought a tremendous impact to Korea through its innovative operation. Let's take a closer look at what an Internet-only bank might have brought about for this big impact.
• Internet Bank? Internet Only Bank!
An Internet-only bank is a bank that provides financial services through the Internet, ATMs, and call centers without a branch office. Same as a traditional bank, an Internet bank can also provide savings, loans, and credit card business. Although it is basically a non-store business, there are cases where a small number of branches are established as needed.
An Internet-only bank is different from Internet banking. While Internet banking is one of the services that is provided by a traditional bank, the Internet-only bank processes all financial services through the Internet only. Submission of documents is also submitted on the Internet, and identification is confirmed by certified certificates, fingerprints, video calls, and so on. It is also characterized by its benefit to operate at a lower cost than existing traditional banks. This is because there are no branch offices or labor costs, so cost savings can provide customers with high deposit rates, low lending rates, and low fees. Moreover, it has good accessibility and operates 24 hours a day without holidays. In addition, various services linked digitally such as personalized financial service, digital interest, and asset management service through big data are possible.
• Surprising New Face that Appeared in Korea
In Korea, K-Bank was launched on April 3rd, 2017 and became Korea’s first Internet-only bank. Secondly, on July 27th, 2017, the Kakao Bank was officially opened. K-Bank reached 100,000 accounts on the third day after its launch, and Kakao Bank achieved 3.4 million downloads of its app in 10 days. Kakao Bank has made smartphone users’ convenience a strategy to target the younger generation. One can be view the account directly from the home screen, and it can easily transfer money to a friend on Kakao Talk. K-Bank, the starter, chose the strategy of interest-rate competitiveness and offline marketing. K-bank also provides banking services on desktops as well as smartphones. In this regard, K-bank is receiving favorable responses from offline-minded employees.
• Catfish in Korean Banks
After K-Bank and Kakao Bank appeared, they were playing a role of "catfish" in Korean banks. The catfish effect is the effect of the presence of a strong competitor who raises the potential of other competitors. These two banks secured the number of subscribers close to three million in the first month of launch, giving the commercial banks a sense of crisis in that they could be driven away if they did not change. This being so, large-scale commercial banks have started to lower their interest rates and commission rates competitively and renew their future sales strategies.
• International Success Stories
-Germany: Fidor Bank
Fidor Bank has been operating since 2009 and is known to provide the most innovative banking services in Germany. This bank has established a partnership with more than 20 companies through its open IT system to provide various financial services. Total assets have grown steadily since its founding, at €450 million, with an increase of between 50,000 and 100,000 customers each year.
-Japan: Japan Net Bank
Japan Net Bank is Japan's first Internet-only bank, established in 2000. The bank has consistently attracted new customers by offering a variety of benefits to its Yahoo! Japan customers, such as setting up deposit accounts on Yahoo! Web screens and providing loan products for Yahoo! auction sellers. As a result, it turned over a surplus in five years after its opening, and it had a net profit of 22 billion won in 2000.
• What Should They Worry About?
Internet-only banks seem to have to wait a little longer to find a place to settle quickly despite this rapid growth. This is because there are limitations of an internet-only bank. The first thing is the market preemption of commercial banks. This is because commercial banks are competing to offer more convenient mobile banking services. Secondly, the National Assembly is not loosening regulation of Separation of Banking and Commerce. If the National Assembly does not relax this law, which is a system to restrict the control of financial companies, it is impossible to invest in KT (8% stake) and Kakao Bank (10%). The last critical point is the limit of non-face-to-face lending procedures. A local bank official noted that a quick and easy lending process can help improve earnings, but non-face-to-face reviews that rely solely on documents may increase the default rate.
Many people prefer Internet-only banks because of better banking services, lower fees, and more convenience. However, there are advantages of Internet-only banks, but there are also limitations of this type of bank. In order to overcome these shortcomings, we, the subject of this service, have to make an effort. If we monitor and control how they change and grow, Internet-only banks will overcome these limitations and grow into major banks.