Banks urged to embrace new technology to move forward
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By Lee Dong-min
Expounding upon South Korea's remarkable economic growth that pushed its status from a poor post-war country to one of the Asian Tigers now serves as a cliché; the rags to riches story of the country has been one recounted too often.
In the new era where South Korea has already reached into the atmosphere of stability, the importance of the service sector beyond that of the primary and secondary sectors is rising. From that aspect, the role that South Korean banks must play in order to keep up the stability is indeed heavy.
Contrary to the importance of such a role, South Korean banks have been lagging behind the past few years. In the second quarter of 2012, the combined profit of South Korean banks 59 percent from a year earlier. In a 2013 survey by The Banker, the competitiveness of Korean banks was ranked 83rd out of 93 nations.
Moreover, the current benchmark interest rate set by the central bank is at a low 1.5%, further restricting future profit prospects of Korean banks. To ensure the financial health of Korean banks and raise their future competitiveness for the stable growth of Korea's financial sector, a series of measures that follow the flow of the century under the quote "embrace the new" must be taken.
For Korean banks to push ahead in the twenty first century, more attention must be shown towards the trend of the banking industry moving along with the advances of technology.
Less transactions are made face to face, and mobile and Internet banking are becoming common services. Such is the importance of software in providing financial services, also known as FinTech. Tech entrepreneurs are zooming in on the benefits that FinTech has to offer, such as easy transactions for consumers, fraud monitor, and convenient financial planning.
While Korea's banking institutions and services have been slow to collaborate with the new software FinTech offers, other countries quickly embraced bankless services through FinTech. As for Korea, it took more than two years for major IT company Kakao to launch mobile transfer service Bank Wallet Kakao.
Despite the reluctance of Korean banks to act with speed and the existence of unhealthy regulations in the emergence of a new industry, Korean banks are finally acknowledging the profitable potential FinTech shows. This year, the Financial Services Commission started to reveal new measures to loosen the regulations that are blocking the growth of FinTech firms. By unraveling such regulations and showing more drive towards accepting FinTech, Korean banks will recuperate and thrive.
The marketing strategies of banks are also a key facet that would benefit from reading the current situation and applying new measures. Recently, the national household dept is up high and South Korean consumers are cautious of spending, as can be show through the sharp decrease of department store profits.
As Korean consumers are seeking ways to spend more efficiently and plan out a safe retirement plan, banks must seek to offer a variety of products related to financial planning and provide diversification plans for financial assets. Such are measures that banks already implement, but the difference to focus on is that banks should target more single-person households and the current young working generation that extensively uses social media.
For one, the proportion of single-person households was 24 percent in 2010, and is expected to reach 30 percent by 2020. Providing small but efficient financial plans suitable for one living alone would be a project for banks to invest in.
Moreover, banks must also incorporate new marketing strategies that apply social media to aim at the younger generation that have just started working. The surge in the popularity of social media is one that cannot be ignored, and new effort must be taken to actively utilize Twitter, YouTube, and other social media in order to reach out to the twenties and thirties.
The age where consumers come to banks is coming to an end. In the modern world, banks must come to the consumers through new methods and different target strategies. FinTech, new and diverse financial planning products, and use of social media are just a few of the measures that can reinvent South Korean banks.
To keep up with the times is not merely a cliché; it is a value stronger than ever in a world of volatile economy. Change becomes drive, and drive becomes profit. Through embracing the new, South Korean banks will successfully move onto the orbit of financial stability and a profitable future.
Lee Dong-min is a junior currently attending Johns Hopkins University, double majoring in International Studies and East Asian Studies, with a minor in Economics.