ANNIVERSARY SPECIAL 'Tech M&As crucial for KB's digital leap forward'

Han Dong-whan, senior executive vice president and digital head of KB Kookmin Bank, shares the bank's digital strategy at his office on Yeouido in Seoul, Oct. 8. Korea Times photo by Choi Won-suk

By Lee Min-hyung

Digital banking platforms will act like a magnet pulling in more and more customers, so developing the platforms with advanced technologies should be a top priority for financial firms' sustainable growth in response to the trend of contactless transactions, according to the digital head at KB Kookmin Bank.

Despite Korea's leadership in information and communication technology (ICT), it has been only a few years since local financial conglomerates came to realize the importance of digital banking, due to the conservative nature of the industry and the heavily regulated market environment.

But with nationwide social changes brought about in largely by the pandemic, banks are expressing their willingness to continuing fostering a digital mindset in line with the rise of contactless transactions that have become the standard this year.

The most-sought-after slogan chanted by leaders of most financial giants this year is undoubtedly “digital transformation.”

KB Financial Group, the nation's top financial holding firm by market capitalization, is no exception. KB has widely been considered the most digital-friendly banking group here, having launched a series of mobile banking platforms in a more preemptive manner than its rivals.

KB Kookmin Bank's digital financial group head, however, underscored the need for carrying out aggressive mergers and acquisitions with non-banking tech companies for the group's digital leap forward.

“The success of digital banking relies on how to embrace and converge emerging technologies into existing banking platforms,” Han Dong-whan, senior executive vice president at KB Kookmin Bank, said in an interview. He is the top executive mapping out and executing digital strategies at KB Financial Group and KB Kookmin Bank.

“One of the biggest differences between overseas financial giants and domestic ones is the willingness to acquire tech firms,” he said. “Most Korean banks have barely taken over non-banking tech firms, instead focusing on expanding through M&As with existing financial companies.”

KB has decades of expertise in offering a diverse set of financial businesses to individual customers as well as corporate clients. But embracing technology is an inevitable step for its sustainable growth to be in line with the digital banking paradigm shift, according to him.

“We always feel a great thirst to enhance our capabilities in artificial intelligence (AI), big data and cloud computing, as these technologies stand at the center of digital banking,” he said.

“KB always keep a close watch over the possibility to take over companies in the area, as financial companies in the United States and Europe do.”

For now, the top priority of KB's digital division is to keep developing its digital banking platforms in a more intuitive manner by using such technologies, according to him.

“As of early October, about 200,000 customers visit our 1,000 sales offices nationwide every day, but more than 2.1 million users visit our mobile banking apps and the number is expected to be on the steep rise in the digital era,” he said.

“Our current goal is to find more opportunities to cross-sell and up-sell our financial products via the online banking platforms.”

Toward that end, KB must embrace new technologies and develop existing platforms with an eye to reliability and usability, according to him.

Rivalry with internet-only lenders

Han also shared his views on the nation's largest internet-only bank, Kakao Bank. The relationship between KB and Kakao Bank is complex in that while they are in a sense rivals, KB is also the third-largest stakeholder in Kakao Bank.

Kakao Bank, which started its service in 2017, has been on a rapid rise and plans to go public sometime early next year. For now, the company focuses on business-to-customer (B2C) services with a limited amount of capital, so many critics argue the Kakao subsidiary will not pose an imminent threat to existing financial giants' earnings.

KB has cooperated with Kakao since 2015, helping the IT firm to successfully launch its internet-only lending business.

Han also participated in the joint project and shared his company's resources with Kakao Bank to aid in winning a preliminary license for its banking business from regulators.

“Some working-level officials at KB opposed the idea of the partnership, raising concerns that this will have a cannibalization effect on the banking industry,” he said.

“It is true that the rise of Kakao Bank has created a catfish effect across the financial industry here, but the gist of the financial business is to establish trust from the market and customers for a long period of time. My view is that it will take much more time for Kakao Bank to build credibility from the market.”

Kakao Bank has won a favorable market response for its convenience to users, but this has been made possible due to the firm's limited services, according to him.

“The lender offers simple services ― such as non-collateral loans and deposit savings ― so it could create such a customer-friendly and easy-to-use app,” he said. “But it is hard for us to operate our banking platforms in such a simple manner due to the variety of our financial services.”

KB will also continue to come up with ways to inform customers of its diverse financial products more easily through upgraded and user-friendly platforms, which he called a lifetime task for all conventional big lenders.

He said KB's 2021 goal for its digital leap forward is centered on converging AI with its banking platforms, so that users can search for and find what they want more easily and conveniently via its banking apps.

“For us, the digital transformation is not something to find fresh and specific revenue sources via digital platforms, but is more like making the bank more digital-oriented, thereby creating more chances for sustainable growth there,” he said.