Simple authentication exposing loopholes
By Nam Hyun-woo
Korea's newly introduced internet-only banks, which are gaining popularity for their easy banking services, are triggering concerns over scams and other security issues.
According to Kakao Bank, Monday, the internet bank has received reports of 10 cases of identity theft. Its clients claimed their ID card photos and other bank account transaction records were used without their knowledge. Some cases involved loans worth 10 million won ($8,790).
Kakao Bank said it found all of those thefts were committed by family members of the clients such as their children or grandchildren, who can easily gain access to their ID cards and other information.
Kakao Bank requires a mobile phone registered under the client's name, a photo of the client's ID card and a transaction record of their accounts at other banks.
After registering the photo, Kakao Bank transmits 1 won to the client's other bank account through a random name. After confirming the name at the other bank account, the client provides the name to Kakao Bank to verify their identity.
Those simple authentication processes helped the bank promote its "easy and fast non-face-to-face banking." Also, it extends up to 3 million won without asking for data on income.
However, this also allows family members who share bank accounts to exploit the simple process. In one case, a grandchild who knew his grandfather's bank password received loans that way.
Kakao Bank said it is working on countermeasures to combat identity theft, such as authentication through a text message, but critics already question the efficiency of such measures.
Doubts are also on other self-proclaimed strengths of the low loan interest rates of the internet banks.
Unlike their promotion, Korea Insurance Research Institute data shows K bank, another internet-only lender opened this year, offers customers with low credit scores higher interest rates than conventional banks.
The institute said K bank offers lower interest rates than commercial banks for those with good credit. However, that was not the case for those with poor credit.
Kakao Bank has also focused on loans for those with high credit scores, extending 90 percent of its entire loans to those with above average credit scores, according to Rep. Park Yong-jin of the ruling Democratic Party of Korea.
"Internet banks will focus on lending to loan seekers with high credit scores, because the banks' capital is smaller than their existing rivals, raising the importance of solvency," the KIRI report said.
By Nam Hyun-woo
Korea's newly introduced internet-only banks, which are gaining popularity for their easy banking services, are triggering concerns over scams and other security issues.
According to Kakao Bank, Monday, the internet bank has received reports of 10 cases of identity theft. Its clients claimed their ID card photos and other bank account transaction records were used without their knowledge. Some cases involved loans worth 10 million won ($8,790).
Kakao Bank said it found all of those thefts were committed by family members of the clients such as their children or grandchildren, who can easily gain access to their ID cards and other information.
Kakao Bank requires a mobile phone registered under the client's name, a photo of the client's ID card and a transaction record of their accounts at other banks.
After registering the photo, Kakao Bank transmits 1 won to the client's other bank account through a random name. After confirming the name at the other bank account, the client provides the name to Kakao Bank to verify their identity.
Those simple authentication processes helped the bank promote its "easy and fast non-face-to-face banking." Also, it extends up to 3 million won without asking for data on income.
However, this also allows family members who share bank accounts to exploit the simple process. In one case, a grandchild who knew his grandfather's bank password received loans that way.
Kakao Bank said it is working on countermeasures to combat identity theft, such as authentication through a text message, but critics already question the efficiency of such measures.
Doubts are also on other self-proclaimed strengths of the low loan interest rates of the internet banks.
Unlike their promotion, Korea Insurance Research Institute data shows K bank, another internet-only lender opened this year, offers customers with low credit scores higher interest rates than conventional banks.
The institute said K bank offers lower interest rates than commercial banks for those with good credit. However, that was not the case for those with poor credit.
Kakao Bank has also focused on loans for those with high credit scores, extending 90 percent of its entire loans to those with above average credit scores, according to Rep. Park Yong-jin of the ruling Democratic Party of Korea.
"Internet banks will focus on lending to loan seekers with high credit scores, because the banks' capital is smaller than their existing rivals, raising the importance of solvency," the KIRI report said.
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