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Sun, March 26, 2023 | 21:47
Companies
Starbucks unnerving Korean banks
Posted : 2020-01-20 16:31
Updated : 2020-01-21 13:08
Park Jae-hyuk
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A Starbucks logo is seen in this file photo. From top left are Hana Financial Group Chairman Kim Jung-tai, KB Financial Group Chairman Yoon Jong-kyoo, KB Kookmin Bank CEO Hur Yin and NongHyup Financial Group Chairman Kim Gwang-soo. / Korea Times file
A Starbucks logo is seen in this file photo. From top left are Hana Financial Group Chairman Kim Jung-tai, KB Financial Group Chairman Yoon Jong-kyoo, KB Kookmin Bank CEO Hur Yin and NongHyup Financial Group Chairman Kim Gwang-soo. / Korea Times file

By Park Jae-hyuk

A growing number of Korean banking groups are showing alarm at Starbucks, describing the U.S. coffeehouse chain as a potential rival that could threaten their survival in the financial market within a few years, industry officials said Monday.

The banking groups fear that Starbucks may stir up the conventional financial market based on the significant amount of cash customers load onto its prepaid gift cards ― cards that have yet to be subject to financial regulations.

According to the Wall Street Journal, the coffee shop chain's U.S. headquarters had $1.2 billion that customers had loaded onto Starbucks gift cards and the mobile app as of the first quarter of 2016 ― surpassing the amount of cash that major American provincial banks had in their deposits.

The amount of cash its Korean unit holds is confidential, but it is estimated at over 70 billion won ($60.2 million), according to its regulatory filing.

Starbucks, however, has been free of financial regulations here as it has not offered interest for the prepaid cash and the money loaded onto its gift cards and app can be used at its stores only.

Hana Financial Group Chairman Kim Jung-tai expressed his concerns over this situation.

"Technologies have allowed coffee companies like Starbucks to be our rivals," he said in his New Year's address. "It will be fine to call Starbucks an unregulated bank, not a mere coffee company."

In 2019, KB Financial Group Chairman Yoon Jong-kyoo, KB Kookmin Bank CEO Hur Yin and NongHyup Financial Group Chairman Kim Gwang-soo mentioned Starbucks in their New Year's messages.

"The most-used mobile payment app in the U.S. was the Starbucks app, not Google or Apple Pay," Yoon said. "About 40 percent of its payments were made with the app, and the amount of cash loaded onto its prepaid cards and apps surpassed the amount of cash that some provincial banks had."

Hur cited the amount of cash loaded onto Starbucks gift cards, in order to emphasize digitization, agility and efficiency are key factors for his bank's survival.

Kim urged his company to learn from Starbucks' corporate culture of fostering skilled employees.

The nation's financial authorities have also been interested in Starbucks with a positive view.

The Financial Supervisory Service invited Starbucks Vice President Michele Waits to its international symposium in November 2018 to share the company's insights into financial evolution through digital innovation.

The invitation came as Starbucks began moving into the financial industry based on its investments in blockchain and cryptocurrency.

In July 2018, it announced it would invest in crypto exchange Bakkt as the first launch partner.

Experts expect Starbucks will use cryptocurrency to manage its cash prepaid in various currencies.

Furthermore, they say the company will begin the asset management business worldwide via the prepaid cards, expanding its presence in the currency exchange, loan and insurance markets.

"Starbucks have been regarded as a fintech firm, not a coffee company, over the past few years," a bank official said. "The removal of the word coffee from its signboard also proves this."

Against this backdrop, calls have grown for the financial regulators to put controls on Starbucks.

"Regulations are needed for prepaid service providers to maintain a certain level of capital adequacy ratio," Hansung University's economics professor Kim Sang-bong said.


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