KT, Kakao set to lead online bank with on-demand service

Daniel Yun, right, head of Kakao’s mobile bank taskforce, shakes hands with Kim In-hoe, center, executive vice president at KT’s K-Bank operating committee, before a press conference at the Korea Federation of Banks, in Myeongdong, central Seoul, Monday. / Yonhap

By Lee Min-hyung

KT and Kakao said Monday that they will launch the nation’s first Internet-only bank before late next year, pledging to operate on-demand banking service converged with their information and communication technology (ICT).

This came a day after the Financial Services Commission (FSC) granted preliminary licenses to run the Internet-only banks for two consortiums ― led by KT, the nation’s dominant fixed-line operator, and Kakao, the operator of messenger app KakaoTalk.

Representatives from Kakao Bank and K-Bank said in a press conference that they expect the services to start operations in the second half of next year, as the new services need a sufficient testing period for security and a final license from the FSC.

KT will differentiate the service by launching the Internet-based banking system both for online and offline customers, the company said.

“We are going to install our smart banking system on some 70,000 public phone booths that we are operating nationwide, which means K-Bank can be more widely used than other services,” said Kim In-hoe, vice president at K-Bank operating committee.

KT said it expects K-Bank to turn a profit within three years after starting operations, as it could minimize costs for building infrastructure for the service.

“Our strong infrastructure for internet service will be a building block to start the online bank service,” he said. KT has more than 30 million users for its telecom service.

The company said the KT-led consortium, supported by GS Retail and BC Card, will help K-Bank to gain access to wider channels of customers.

For global expansion, the company formed an alliance with Alipay, China’s largest e-payment service operator, which also holds shares for the consortium. KT declined to comment on how many shares Alipay is holding for K-Bank.

“K-Bank has adopted Alipay’s fraud detection system (FDS) for security enhancement which we believe is the most important factor to run the computing system for the Internet-only bank,” the KT executive said.

Kakao said it will make the most of its strong on-demand mobile platform.

“We are holding some 38 million users for KakaoTalk, with five million of them using KakaoPay,” said Daniel Yun, head of mobile bank taskforce at Kakao. “In particular, the mobile payment service reached the user number in less than a year after the launch.”

Given the previous records, Kakao expects Kakao Bank to hit more than two million downloads within months by linking the service to KakaoTalk, the company said.

Eleven companies ― including Korea Investment Holdings, KB Kookmin Bank and SGI Seoul Guarantee Insurance ― have joined the Kakao-led consortium to ensure more secure and mobile-based banking service, Kakao said.

“About 40 percent of Kakao Bank workforce will consist of IT specialists who can manage possible security threats in real-time,” the Kakao executive said.

Kakao Bank also sought a global presence by partnering with China’s largest internet service operator, Tencent.

“We are seeking synergies through the partnership with WeBank, China’s first Internet-based bank,” he said. Tencent is one of the major shareholders of WeBank.

“Kakao Bank also plans to tap into the Indonesian market by partnering with Path, a social networking messaging service, which has the world’s largest userbase in Indonesia.”