Banking group CEOs spearhead digital transformation

Firms focus on creating platforms to offer simpler, faster services

By Yi Whan-woo

Leaders of the country's major banking groups are seeking innovative strategies to digitally transform their firms as the competition with tech companies, using the competitive power of their platforms to muscle into the financial sector, grows fiercer.

The CEOs are especially pursuing the creation of comprehensive platforms, backed by up-to-date technologies, that bring together all available services offered by their banking groups' affiliates, and also to provide customized services.

Digital transformation is considered a matter of survival, given that IT giants such as Kakao and Naver are making inroads into the financial industry, raising the question of whether they have the potential to replace traditional banking groups over the long term.

Such a possibility is growing amid extended social distancing rules and a greater reliance on digital technology during the ongoing pandemic.

“The chaotic, rapidly-changing financial business environment requires insightful, swift responses, which in turn necessitates a stronger need for leadership,” an industry source said.

He noted that building a digital platform is costly and does not guarantee profits in the short term, making the need for strong, determined leadership more critical.

Under these circumstances, sources said the goal of digital, non-banking growth is blooming among banking groups, and accordingly their staff are increasingly focused on long-term growth, looking beyond quarterly earnings.

The five major banking groups ― KB, Shinhan, Hana, Woori and NH ― are seeking to create centralized “control towers” that oversee their digital and IT businesses under the direction of each CEO's office.

In the case of KB and Woori, their respective chairmen ― Yoon Jong-kyoo and Son Tae-seung ― have been at the forefront of digitization efforts from their inception.

Woori Financial Group endorsed Kim Sung-jong, executive vice president of its flagship affiliate Woori Bank, to execute the group's IT digitization strategy led by Son.

For Hana Financial Group, it newly created a vice chairman-level post to support Chairman Kim Jung-tai in visualizing digital growth.

“The centralized control tower facilitates top-down processing, and responds to the market promptly,” a source said.

The banking groups are also streamlining their hierarchical structures, giving more authority to IT subsidiaries, expanding data research units and scouting outside experts.

IT-related expenses for affiliates have been rising ― NH Financial Group allocated a combined 486.6 billion won ($425.1 million) this year exclusively to upgrade the IT capabilities of its affiliates NH Bank, NH Life Insurance and NH Investment & Securities.

“The increased spending in non-banking areas such as IT would not have been possible without the CEOs' leadership,” another industry source said.

To further support the CEOs' initiatives, Kim Woo-jin, a senior research fellow at the Korea Institute of Finance (KIF), proposed guaranteeing them sufficient terms so they can see through their digitization roadmaps as planned.

“The CEOs will mostly focus on immediate results and superficial achievements if their positions are not guaranteed to be long enough for them to implement their vision,” Kim said, adding that in general most of the CEOs appear to be qualified for long-term leadership.

Regarding their digital platforms, the interim goals of the groups vary by sectors, although they ultimately seek to offer all-in-one services platforms.

For instance, Woori is initially pushing to create a unified payment app for clients of Woori Bank and Woori Card.

“This is because a considerable number of our app users are clients of both Woori Bank and Woori Card, so combining payment services can help them,” the group's media relations officer explained.

The banking groups' long term vision is related to MyData, one of the government's key projects to reshape the outdated financial sector in response to the Fourth Industrial Revolution.