Will Naver launch internet bank?

Naver's head office in Seongnam, Gyeonggi Province / Korea Times file

By Lee Kyung-min

Expectation is growing that Korea's largest portal Naver is on a fast track to opening the country's third internet-only bank.

This follows the government's move to allow up to two more tech firms to enter the financial market by 2020, as part of efforts to spur the digital economy through the “new growth engine.”

The Financial Services Commission (FSC) said Sunday it plans to receive applications from internet and tech firms in March and preliminary approvals will be made in May at the latest.

It said allowing more internet-only banks is in line with the regulator's efforts to upgrade the financial sector.

The ongoing move will inevitably unnerve the two established internet banks, Kakao Bank and K bank, given Naver's capacity to provide substantial capital and its years of business experience as an IT giant.

Naver may show a greater interest in the coming months following the revision of a law under which nonfinancial firms with over 10 trillion won ($8.9 billion) in assets will be able to exercise voting rights of up to 34 percent in internet banks, up from 4 percent.

The revised law, set to take effect in January 2019, is a major deregulation that would open the door for capital-heavy conglomerates to have greater control in internet banks.

Naver is currently seeking to enter the internet banking market in other Asian countries through its subsidiary LINE, a global mobile platform operator based in Japan which is trying to obtain a license to enter the internet banking business in Japan, Taiwan and Thailand.

In many Southeastern Asian countries, LINE's strong brand recognition, user-heavy platform and rich content are well received, indicating a great potential for its banking service to penetrate and succeed given most phone users are already using LINE.

Mirae Asset Daewoo, with which Naver has a joint partnership to boost cooperation in the digital financial business, could be its highly viable consortium partner.

“A review is underway over feasibility and business prospects among others, although nothing has been decided yet. We are weighing our options,” an official from Naver said.

“The recent deregulation to help foster the IT industry is a step welcomed by many tech firms including us, which we consider a positive factor for our possible business expansion. We remain open to various options.”

Kiwoom Securities and Interpark Corp. are two other candidates that are expected to apply.

Kiwoom Securities head Lee Hyun said in September that the firm's knowhow from managing over 3 million customers through an online platform as well as financial services offered by two small savings banks will help the firm provide a service he claims will offer unrivaled quality.

With the envisioned license, Lee added, the firm would expand its business to include the real estate investment trust (REIT) business, through which a high-yield service securities firms can seek particular synergy effect via real estate-based project financing.

Interpark Corp. whose earlier application was denied in 2015 will decide whether to form a consortium, a process it deems can be better prepared based on its prior experience three years ago.

Of ICT firms with over 10 trillion won in assets eligible to apply, online game developers Nexon and Netmarble are also considered viable candidates.