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Newsletter | February 2016, Issue 1
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BANKING
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FSC Grants Preliminary Approval for Korea’s First Internet-Only Banks
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On November 29, 2015, Korea’s top financial regulator, the Financial Services Commission (the “FSC”), granted preliminary approval to Korea Kakao Bank consortium and K Bank consortium to establish Korea’s first internet-only banks.16
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Currently, the FSC is amending the Banking Act to allow non-financial companies, such as ICT companies, to increase their ownership in internet-only banks. The FSC has announced that once the regulations are amended, it will grant additional approvals for internet-only banks.
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Also, to further allow creative internet-only bank business models, the FSC is considering whether amendments to certain restrictions under the relevant laws and regulations are necessary, such as the Electronic Financial Transactions Act.
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With the introduction of the internet-only bank system in Korea, we expect to see the Fin-tech market open up in full scale in the near future.
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Background of Preliminary Approval
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This preliminary approval was granted as part of the FSC’s two-stage “Initiation to Introduce Internet-only Banks”17:
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1.
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Stage 1 (Within Current Regulatory Scheme): As intended under the announced plan, the FSC granted the license to one or two internet-only banks. Korea Kakao Bank consortium and K Bank consortium received those approvals. However, the approvals are subject to the condition that internet-only banks may conduct banking business by way of electronic financial transaction; and
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2.
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Stage 2 (Under the Amended Regulatory Scheme): Once the National Assembly approves the amendment to the Bank Act introducing systems for internet-only banks, the FSC intends to grant license to additional internet-banks.
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Major Evaluation Factors
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The evaluation committee consisted of external experts in the relevant fields. In evaluating the applicants for preliminary approval, the most critical factor that the evaluation committee considered was the business plan. In conducting a detailed review of the business plan, committee members considered innovativeness of the business ideas, sustainability of the business model, and whether the business would provide convenience or other improvements to the financial consumer’s experience.
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Other evaluation factors included shareholding structure plan, size of equity capital. Also, operational considerations were taken into account, such as IT systems, sales and physical facilities, and human resources.
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Overview of Applicants
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A wide range of companies applied for preliminary approval. Applicants included financial institutions as well as various companies in the gaming industry participating in the consortiums (e.g., platform, distribution, IT payment systems, IT security and ICT companies).
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Led by Korea Investment Holdings, Kakao, and Kookmin Bank, Korea Kakao Bank consortium’s business model is centered around the idea of increasing efficiency through direct communication between merchants and customers, mid-level interest rate loans using advanced credit rating systems, and easy remittance systems, utilizing the Kakao Talk platform.
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K Bank consortium, led by KT Corporation, Woori Bank, and Hyundai Securities, proposed a business model focused on mid-level interest rate loans, using big data from communications, payments and distribution information, easy payment systems (using mobile phones and e-mails), and asset management services based on robo-advisor systems.
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After receiving preliminary approval, the Kakao and K Bank consortiums are now in the process of applying for the main approval. The two consortiums are expected to obtain the main approval within the year, and launch their internet-only banking business.
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| 16 |
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Banks that will operate banking business by way of electronic financial transaction, as defined under the Electronic Financial Transactions Act. There were 3 applicants, and the FSC granted approval to two of the three.
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| 17 |
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Announced on June 18, 2015.
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Back to Main Page
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If you have any questions regarding this article, please contact below:
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