Plans in place for South Korea’s first online bank

Plans in place for South Koreas first online bank

If approved by the government, South Korea’s banking industry could be transformed with the introduction of the country’s first online bank.

Internet banking is a burgeoning sector in the capital Seoul and consumers that are comfortable using new technology prefer making transactions online and by mobile rather than visiting branches. The new online bank is to be modelled on Mybank which is supported by Alibaba’s finance affiliate and Tencent’s WeBank and will use its messenger customer base.

Brokerage and asset manager Korea Investment Holdings has partnered with Daum Kako internet portal and operator of chat app KakaoTalk, according to the Financial Times. Daum Kako intends on taking on a 10% stake, which is the highest a non-financial company can own, while Korea Investment will have a 50% stake.

Because of reports of shrinking margins, low interest rates and a slow economy, the South Korean government is planning to issue permits by the end of 2015 for a one or two internet only banks in order to become viable competitors, the FT reports.

Alongside this, it will allow newcomers to enter the industry for the first time in more than 20 years. At present, banking laws prevent large corporations from owning more than 4% of a bank, but the relaxation of rules will now let IT companies have a stake of up to 50% in the internet banks.

According to the FT, financial regulators are concerned by big industrial groups like Samsung and Hyundai. Other financial and technology groups are interested such as the country’s leading asset manager Mirae Asset, telecoms company KT Corp and online shopping website Interpark.