KB, Hana suspend AI services amid new Financial Customer Protection Act

A customer talks with a bank clerk at a sales office in Seoul in this file photo on April 2, 2020. Yonhap

By Lee Min-hyung

KB Kookmin Bank and Hana Bank have suspended some of their artificial intelligence (AI)-powered banking services, amid concerns that the smart services may breach the new Financial Customer Protection Act.

KB Kookmin Bank made notice of the decision to suspend its Smart Teller Machine (STM) service until the end of April. The STM is an upgraded version of an ATM that allows users to access a wider range of smart services without visiting a conventional bank office.

But the lender decided to suspend operation of the machines amid fears of possibly violating the Financial Customer Protection Act, which will take effect on Thursday. Under the enhanced customer protection law, banks should deliver their explanations of financial products to customers either in person or via email.

KB plans to update the STM's internal system over the next few weeks in line with the newly implemented act.

Hana Bank also decided to suspend its Hi Robo robo-adviser service from Thursday until May 9. This suspension prevents customers from making transactions via the AI platform during these dates.

Chances are that more lenders will follow in the footsteps of these two banks, amid escalating uncertainties over the new act.

Last week, the Financial Services Commission announced regulatory guidelines for the act, but banks expressed discomfort over the belated announcement, as they will now need to change their sales activities “drastically” in only about a week, before the planned implementation of the act.

Acknowledging the industry's unease, financial authorities decided to grant a six-month grace period for banks to bring their products in line with the law.

“Banks are expecting watchdogs to revise some of the outdated clauses of the act, as customers may have to endure some inconveniences amid the era of digital banking,” a bank industry source said. “But the six-month grace period may be too short for banks to review whether all of their financial products are promoted and sold in line with the new act. Side effects will inevitably arise over implementation of the act.”

Another official from the local financial industry also expected the act to weaken lenders' aggressive push for digital banking.

“Digital banking tops the priority of most banks' management goals this year, but this new regulation may slow down their plans to catch up with the digital paradigm shift,” the source said.

The act was introduced at a time when banks face sanctions over fraudulent and mis-sold high-risk financial fund products last year.

“The nationwide fund fiasco sparked this social mood for toughening up financial regulations. However, the details of the act should be fine-tuned so that lenders can both minimize confusion in their sales activities and expand their digital foothold.”