Commercial banks oppose loan interest rate-comparing platform for users

The Financial Services Commission, according to financial sources, is currently reviewing the possibility of launching a mobile platform that helps users to pick loan products by comparing the lending rates offered by both online and offline banks. Korea Times file

By Yi Whan-woo

The major commercial banks appear to oppose the Financial Services Commission's (FSC) initiative to launch a mobile platform that helps users choose loan products by comparing the lending rates offered by all banks nationwide ― both online and offline.

The FSC is reviewing the envisioned platform again, according to sources in the financial industry, Friday. Last year the FSC dropped its plan over banks' complaints that such a platform would further accelerate internet-only banks' advance into the banking business.

Internet-only lenders are known for offering lower lending rates compared to the five main commercial banks: KB Kookmin, Shinhan, Hana, Woori and NongHyup.

For instance, the nation's leading online lender, KakaoBank, offered a minimum interest rate of 3.01 percent when it started selling housing loan products on Feb. 22.

The interest rates of online lenders were between 0.4 and 0.87 of a percentage point lower than the interest rates offered by the five big offline banks.

The total sales of KakaoBank's loan products accordingly reached 110 billion won ($87.6 million) about a month after their release. The amount outpaced that of the all five banks combined at 65 billion won.

“Having users explicitly compare lending rates can possibly be a reason for the mainstream banks not to welcome the idea of the platform, although I don't think online banks do far better in terms of interest rates,” a public relations representative of Hana Bank said.

In addition to the disparate competiveness in lending rates, the commercial banks are reluctant to accept the FSC's platform due to claims that it will give online banks too much of a competitive advantage, in what they already describe as an “uneven playing field.”

The mainstream banks have already been complaining about the policy under which big tech companies have not been restricted from entering the conventional banking business, whereas mainstream banking firms are prevented from expanding into digital banking areas.

“The envisioned platform may be another case in which online banks operated by tech firms gain ground in the banking business over offline banks,” the Hana Bank PR representative said.

A PR representative from KB Kookmin Bank speculated that the platform may require banks to pay a commission for every transaction, which is also “something that offline banks may not want.”

“Such a commission is not necessary when we do offline banking operations, as well as use our own mobile banking platform,” he said.

Some fintech companies currently run rate-comparing platforms. But they are regarded as inefficient, as the relevant products are from second-tier banks, rather than first-tier, mainstream banks.