Customers to gain from bank account transfers
A customer enters a booth set up by KB Kookmin Bank for its automatic teller machine services, with other ATM booths lined up beside, in downtown Seoul Thursday, a day before bank account transfer services began. / Yonhap
By Choi Kyong-ae
Korean banks are facing a tougher time as bank account relocating services began Friday, raising concerns that competition to woo customers may further squeeze margins, according to officials and analysts.
Beginning Oct. 30, bank account holders were allowed to move their existing accounts at banks to new ones through a government-run website, together with automatic payment services for their mobile phone, credit card and insurance bills.
“Large banks may lose customers to smaller lenders which offer higher rates and better services. Competition to keep existing customers or win new ones away from peers may worsen the bottom line of competing banks,” Korea Federation of Banks Chairman Ha Yung-ku said.
The time has come in which banks should show greater loyalty to customers not to lose them to rivals, said Ha who formerly served as CEO of Citibank Korea.
Customers dissatisfied with financial services offered by their banks wanted to relocate their accounts but didn’t due to the time consuming procedure for the transfer, analysts said.
“In the early stages of the account transfer services, large banks will have to spend more marketing costs to maintain existing customers. And the banks which carry bad credit are likely to immediately lose customers to other banks,” KDB Daewoo Securities analyst Kim Joong-han said.
Big lenders such as KB Kookmin, KEB Hana and Woori banks were quick to respond by launching their own product packages which include savings products with higher rates at the upper end of 2 percent.
In the long term, Kim said the introduction of account transfer services will help pave the way for a Korean version of Wells Fargo Bank, America’s fourth-largest bank by assets.
The U.S. bank beefed up its non-interest income by selling a variety of financial products, including credit card, insurance and derivatives, to customers once they were attracted to the bank’s customer-oriented services, the analyst said.
On the website of www.payinfo.or.kr operated by the Korea Financial Telecommunication & Clearing Institute (KFTC), customers can apply for account transfer services using authentication certificates from 9 a.m. to 5p.m.
Payinfo is the integrated system which controls 700 million bank accounts of the country’s 50 financial institutions and their automatic withdrawal information.
On the first day of the service, it drew a strong response given the website was temporarily down in the morning. As of 3 p.m., a total of 63,284 customers applied for changes, according to KFTC data.
Account changes are possible from February next year through bank outlets and each bank’s Internet webpage. Most of other automatic withdrawal services will be possible from June, according to the Financial Services Commission (FSC).
The FSC plans to gradually extend the services to the non-banking sector that includes securities firms and savings banks.