Recent anger in the foreign community about banking services has sparked heated debate. This is the second part of a two-article series by Luis Riestra, founder and CEO of Wise and Wealthy, a foreign company headquartered in Korea. ― ED.
By Luis Riestra
Myth: Foreigners cannot obtain loans, especially large ones such as mortgages, nor can they be issued credit cards.
Fact: It takes a knowledgeable teller that speaks a level of English allowing him or her not to shy away from the foreigner, and one that is more endeavoring on the service side to explain what the options are on loans.
Branch managers have a good part of the say in who gets such loans; at least they are a filter before the application gets to headquarters, if it ever makes it there.
Under banking system-wide criteria, if a person can prove their income to debt ratio is favorable, or in other words that their residual income will cover the loan every month according to their yearly earnings, living expenses and the difference between them, depending on the size of the loan you need, banks will provide up to 60 percent up front for your home purchase.
This applies if you can prove steady employment for several months, whether foreign or Korean. Note that branch managers have a say on the application being forwarded, and this power is fairly arbitrary.
The smallest credit obtainable is a credit card, and you'll have a limit of anywhere between 1 million won to 5 million won. Rarely will a foreigner get more.
Most banks have a set number of rules on issuing credit cards to foreigners, from the most unreasonable and degrading ones such as asking for a deposit-guarantee the same size as the limit of credit, to simply asking for proof of employment and enough payment slips that attest to your regular income.
So What's the Catch?
Front-line staff at most banks have become self-destructive in this bright business opportunity.
More often than not, an application form to get a credit card will not even make it into the hands of the foreigner requesting it, as it is again much easier to say ``I'm sorry, no credit card for foreigners,'' than it is to explain the clients options and how to go about them, what documents to bring, and so forth.
In a country where labor practices basically favor and dismiss lack of performance at work as acceptable, it's in the interest of the tellers to send you off from their desk, with absolutely no repercussions from the branch manager, let alone headquarters.
Obtaining a credit card goes like this: first you need to ``qualify to apply'' under the basic criteria often explained on the application form. Then you need to submit the form with all relevant documents to a teller that might not be bothered with forwarding it.
If you can bypass the teller and sometimes-unconcerned branch manager with your credit card application, you'll be studied by the credit review department at headquarters, and stand a much better chance. Then you are scored against a set of rigorous criteria, most of which are explicit but to large extent confidential to the general public.
If you find out that a credit card application can be directly forwarded to the credit-review department of a bank at their headquarters by mail or fax, you might want to do so.
This does not guarantee you the issuance of the card, but it guarantee the will take a look at it and match it against their official criteria.
There is another catch: The rules commonly referred to as credit risk management criteria apply differently to foreigners and are applied somewhat more strictly.
Most people are not aware that credit-review teams have another set of more implicit rules they don't openly tell anyone about.
Hence, the English teacher getting a rough deal for being in the same category as someone who once upon a time stopped by in Korea on his way to another country while running away from the law, or say someone who published his story online on how much of a good time he had in Itaewon mingling with Korean friends, and other such stories.
This astonishing degree of irrelevance between cause and consequence is all too present in Korea at many levels.
The reason why banks started to enforce a practice whereby newly-arrived foreigners could not open bank accounts for 3 months, and not get ATM cards for another 3 months, was apparently based on a preventive measure against voice-phishing, which in Korea takes the form of a person calling on the phone in Korean and persuasively stealing and using someone's personal information to access his/her funds ― sometimes to have these remitted overseas.
It's very difficult to link newly arrived foreigners with the Korean language-endowed fellow who knows how to turn himself into another Korean on the phone, steal personal information in a country with a very unique personal identification system, and use all this through a unique banking environment, already averse to foreigners in the first place, to send funds abroad.
In the face of public criticism by angry Korean customers who might have been victims of voice-phishing and in the incapacity to be completely hacker-proof, there is nothing easier than to blame the relatively small, diverse and undefended minority and show publicly that you have ``dealt with the problem,'' yet another case of accountability-diversion we all too often see.
The majority-group customers stop making noise; the minority never makes noise, case solved.
There are apparently even immigration regulations based on this principle of avoiding social pressure sparked by isolated mishaps.
The issue with international ATM cards, loans and credit cards still remains largely unsolved, with English speakers getting the rough end of the deal, fueling a very bad reputation for Korea, slowing down any realistic efforts toward a financial hub in the region, and the material for sarcastic jokes at financial market conferences in neighboring countries.
I can tell you of a personal experience while in Tokyo where I interrupted a room filled with about 1,000 financial experts to express my cautious defense of Korea's government initiatives to improve financial markets.
The panel of experts were people with 20-30 years of banking experience in Hong Kong, Japan and other countries, who simply asked the question of the audience: ``Korea wants to become a financial hub of Asia and compete with banking in Hong Kong and the financial market come-back strength of Japan, but is overtly regulated, inefficient and does not allow fair competition to foreign banks. What are they dreaming about?''
It was agreed that it would take the Korean government lots of coordinated and consistent efforts to barely start moving forward. Competing with giants in the region is out of the question. If the financial hub of Northeast Asia is made up of eastern China, Hong Kong, North and South Korea and Japan, we'll always be second last.
Goals are those things that are good, ambitious, motivating and challenging to achieve yet attainable. Anything beyond that is not a goal, but a delusion.
Big achievements are the combination and sum of smaller, more manageable goals.
The inability to service foreigners and the backwards progress of this industry in this sector is seen in hard-to-get credit cards; no international ATM cards; the inability to even open an account if recently arrived; the assumption that you will buy a car or a house with a loan and leave the country without paying it (will you just abandon the property?). All this adds up to a lack of concern and service and a long gap between the status quo and the financially open and competitive Korea that we all want and are genuinely concerned about, Koreans and foreigners alike.
Not only is the change taking place as you read, 2008-2009 will go down in Korean history as the time banks saw no other option but to improve their services.
The Korean Capital Markets Consolidation Act ― a law that if passed and looks very much like it will ― allows certain foreign financial service providers to fair-play with their domestic counterparts in Korea.
That will only bring terror to that portion of the industry immersed in mediocrity, as local institutions will understand the law of natural selection by exposure, not by watching foreign documentaries.
The current survey available online is most likely the boldest of attempts any bank in this country has ever undertaken aimed at leading change.
For the first time in recent years, foreigners can stop complaining and filling up an entire dinner conversation bad-mouthing Korea and its banks and actually channel all those frustrations and energies into constructive information that can be understood, acted upon and turned into improvements.
I arrived in Korea in 2000 and before the end of my second year, on a relatively low salary teaching job, with no extra income to show, with no savings, with no Korean spouse, no guarantors, I applied for and obtained my first credit card from one of the biggest banks that existed back then, and the first thing I did before using it for a purchase was to walk to the nearest branch of another bank to rub it in their face.
I walked out of that bank with two cards, headed to the nearest branch of a yet another financial service provider, where I got my third. It won't be long before some Korean banks give in to the pressure of other banks servicing foreigners, and raking in profits after one of them leads the rest.
This effort, plus a unified front against unfair practices, which my company plans to undertake this year armed with information from both sides of the bargain (banks misconceptions and lack of blue-ocean thinking and foreigners lack of knowledge on what applies to us), will all result in a transformation which, together with new regulations and overseas financial service providers in place, will transition Korea in 2008/2009 into a new banking era.
Not having put our heads and efforts together in recent years accounts for a good chunk of the negligence on the part of banks ― no noise? no problem! let's keep squeezing ― is the type of approach banks have taken in the past.
Foreigners are encouraged to do the Foreigners' Retail Banking Survey, which is easily accessible through www.korea4expats.com. You can submit as much information as you like and leave an email address if you wish to obtain a USB memory stick as a gift (limited quantities). Foreigners in Korea are for most purposes an overseas market to local banks. W & W CEO Luis Riestra in 2005 turned his KDI-school-earned master's degree on foreign investment into a business much to do with foreign business policy and practices of Korea and its global interactions and competitiveness. He can be reached at mfdiluis@consultant.com or at the company's web site, www.bewiseandwealthy.com.