Firms lukewarm about internet-only bank

The Kiwoom Securities headquarters on Yeouido and the Viva Republica headquarters in Gangnam, Seoul. / Yonhap

By Park Jae-hyuk

The financial regulator's renewed attempt to find a third internet-only bank is expected to be a tougher one as no potential bidders have yet shown any interest due to growing skepticism about profitability, according to industry officials, Monday.

The Financial Services Commission (FSC) plans to receive applications for new internet banking licenses between Oct. 10 and 15. A preliminary approval is scheduled to be granted by January 2020.

Although the FSC said it will offer consulting services to those seeking approval, companies that previously showed interest in the license have remained reluctant to join the bid.

Kiwoom Securities and Viva Republica, both of which failed to get an internet banking license during the previous bid in May, are no exceptions.

A Kiwoom spokeswoman said, “We have yet to make any decision on whether to reapply for the internet banking license.” She declined to comment on the reason for the brokerage's cautious attitude.

Viva, a fintech firm operating the mobile money transfer app Toss, also mentioned the possibility of not participating.

“We are still discussing whether to apply for the license. While we are open to all possible options, we may not participate in the forthcoming bid,” Viva Republica CEO Lee Seung-gun told reporters July 18. “We will not participate in the bid, if we are uncertain about the outcome.”

In addition to the two companies, retailers that were considered to participate in the upcoming bid have also been lukewarm about internet-only banks.

BGF Retail, WeMakePrice and Interpark said they are not considering entering the market.

“At this moment, we don't have any plans for an internet banking business,” a BGF Retail official said.

Naver, which seeks to enter the internet banking sector in Japan in 2020, has also denied rumors that it will enter the market in Korea.

“The internet banking business in Korea is not attractive anymore, because of the strict government regulations and low profitability,” said an industry insider who is familiar with the issue.

Industry officials cite the case of K bank, which has suffered worsening profitability over the past two years.

The nation's first internet-only bank suffered a 24.1 billion won ($20.4 million) net loss during the first quarter of 2019, up 28.1 percent from a year earlier.