Banks rush to form alliance with e-commerce firms

Shinhan in joint partnership with China's JD.com

By Lee Kyung-min

A growing number of banks in Korea are seeking strategic partnership with e-commerce companies in a move to diversify their customer bases and find new revenue sources.

KB Kookmin Bank signed a memorandum of understanding with WeMakePrice (WMP) and Seoul Guarantee Insurance in October to offer tailored financing to small- and mid-sized enterprises (SMEs).

Under the agreement, SMEs that sell their products on WMP will be able to secure operation funds as part of a “seller loan,” the bank's main product seeking to help small sellers with liquidity problems.

Unlike conglomerates or large companies with enough cash reserved to pay and refund customers in large volume transactions, SMEs do not have as much capacity, leading to what they call “unintended hindrance in business.”

If a customer buys an item, the seller usually has to wait up to 50 days until after the e-commerce company, the holder of funds, finalizes the cash transfer following conclusion of a transaction without refund or exchange requests.

Such a time-consuming process becomes less of a burden for SMEs using KB's loan, whereby the bank gives its money in the form of a loan to pay them immediately and wait until the e-commerce firms wire the cash after finalizing transaction.

The loan is available for SMEs that are under a business agreement with the bank.

“The loan is expected to draw positive responses from many SMEs for whom coming up with enough cash is a major concern,” a KB official said.

“The program is also beneficial to e-commerce firms following an increase in transactions. It is also beneficial to us because we can land new customers. While in its infancy, the possible success of the program will help the bank draw up a similar business strategy with other entrepreneurs,” he added.

Apart from the corporate customers, KB also has broadened its marketing channel with individual ones.

KB's installment savings launched in partnership with TMON, an online commerce firm, offers a bonus point equivalent of 5 percent of the principal and interest total the account holder turns into online credit in the event of account maturity.

Industrial Bank of Korea (IBK) introduced an online branch on TMON in March.

The state-run bank registered there in the form of “mall-in-mall,” and began selling one-year installment savings with an annual interest rate of up to 2.5 percent.

The bank's around-the-clock foreign currency exchange service at a prime rate is available to non-members. Immediate consultations are available on loans and credit card issuance there.

“We decided to launch the service with TMON, primarily due to its broad customer base, mostly young people in their teens, 20s and early 30s,” an IBK official said.

“They can easily choose our services with the click of a button without having to visit our bank's website or install the mobile app. They are familiar with the e-commerce sites and we hope they feel the same with us,” he added.

KEB Hana Bank launched a similar online “outlet” with Interpark, another e-commerce firm in July.

Six financial products available include installment savings, loan and deposit accounts. The bank offers online credit in proportion to the amount borrowed.

Shinhan Bank's Chinese corporate entity in joint partnership with Chinese e-commerce giant JD.com rolled out a loan for Chinese sellers.

Under the tailored program, certain customers with over three years of purchase history with China's second-largest e-commerce firm are granted 300 million yuan (49 billion won) in loans.

Shinhan is the first foreign bank to have clinched a partnership with JD.com's loan platform.

JD.com, also known as Jingdong, has 400 million customers.