Value context and insight. lkm@koreatimes.co.kr
ANALYSIS Banks rushing to reduce no. of apps, integrate digital financial services
gettyimagesbank
By Lee Kyung-min
Lenders that neglect consumer convenience lack foresight
By Lee Kyung-min
Korea's leading commercial banks are introducing new apps with integrated financial services, in a move to better compete with their Internet-only fintech rivals defined by higher user satisfaction due to faster, easier and simpler app operation.
Commercial banks' collective efforts toward digitization, however, are set to fall further behind, since less-motivated, traditional lenders lack the technological means to realize speedy app operation, something fintech service providers are bound to excel at via the healthy feedback loops of day-to-day fixes, following constant trial and error.
No immediate consumer convenience is expected either through Open Banking or MyData, two key data-driven policy initiatives spearheaded by the Financial Services Commission (FSC). The reason is that while the system supposedly facilitates integration of the services of multiple financial groups, it fails to incentivize cooperation among these market players highly anxious about losing customers to their competitors.
Open Banking and MyData enable faster, easier access to financial services on a single platform, enhancing consumer experience and fostering innovation, according to the FSC.
Lacking consumer-oriented mindset
Shinhan Bank operates SOL, an app that integrates services from six of its affiliates, including card, securities, insurance, real estate investment and pension management.
Similarly, KB Kookmin Bank launched KB Star Banking and Hana Bank launched New Hana OneQ in August 2020. Woori Bank has WON Banking and NongHyup Bank is expected to soon launch an integrated version of its previous apps combined.
These banks' efforts are notable in that they aim to streamline dozens of firm apps that had limited functions, a reason why many users were left frustrated, as they downloaded a number of apps only to find out the services they wanted were not available.
Korea's five financial groups each had up to 37 apps in 2020. KB Financial Group had 37 apps, including 18 rolled out by its bank subsidiary, Kookmin Bank. Shinhan Financial Group had 29, including 13 from Shinhan Bank, whereas Hana Financial Group had 22 apps, and Woori Financial had 18. NongHyup had 14.
Each group introduced separate apps for separate functions, such as remittances, reward points accumulations, identity authentication and foreign currency exchange.
The provider-centered approach has long been tolerated because having a variety of functions in a single app meant a significant delay in data-processing time.
“The increase in the number of services will require a corresponding expansion in the operating capacity of each app,” Korea Institute of Finance researcher Kwon Heung-jin said. “It is understandably an easy way for financial services firms to launch an app for one or two functions, if their priority is speed.”
The traditional market players falling behind their fintech competitors in that sense is an inevitable outcome, a trend that will continue for the time being, unless they recognize the lack of a consumer-oriented mindset.
Kakao Bank has a single integrated app, and K bank has one each for retail customers and corporate customers.
Toss Bank will provide its banking services via the existing Toss platform, used by 18 million people, without launching a separate app.
“People have no reason to stick to inconvenient traditional banks' apps when they have much simpler, easy-to-use alternatives from newcomers,” Kwon said.
Financial Services Commission Chairman Eun Sung-soo Korea Times file
Is Open Banking still in its infancy?
The current regulations and policy drives will do little to foster online financial services, unless regulators understand that market players' vested interests in maintaining the status quo outweigh the need to follow government guidelines.
User evaluation of Open Banking, a once-touted service, supposedly enabling easy and fast cash wiring among different bank accounts, remains poor, despite the launch of the service over a year ago.
The number of accounts opened under Open Banking exceeded 112 million as of January, 13 months after the system was fully implemented in December 2019. Over 65 million people ― including multiple-account holders ― subscribed to the system.
The number of users spiked, but the most frequently used service was limited to checking account balance, an embarrassing outcome brought on by service providers' reluctance to facilitate the wiring process to protect their vested self-interests.
Data from the Korea Financial Telecommunications & Clearings Institute released in June 2020 showed 84.5 percent of those surveyed used Open Banking for checking their balance, followed by transactions history inquiries (8.8 percent), and withdrawal or transfer (3 percent).
“Lenders do not want their customers' account balances to become empty. They do not seek cooperation when the result is fund outflow to the accounts of their competitors,” Kwon said.
This competitive aspect points to the lack of foresight of FSC Chairman Eun Sung-soo, who celebrated the launch of the system, saying consumers could access all of the financial services of banks and fintech firms in a single app.