Banks venture into mobile telecom biz to secure new income streams

gettyimagesbank

Major commercial banks are venturing into the mobile telecommunications market to diversify their portfolios and also to secure more clients.

KB Kookmin Bank was the country’s first lender to establish a presence in the mobile telecommunications sector, winning approval from financial regulators to continue the business in 2023 following a four-year experiment conducted in a regulatory sandbox program.

“Our entry into the mobile telecommunications sector undoubtedly sparked interest among other lenders,” a KB Kookmin Bank official said, Tuesday.

The official noted that the bank attracted an increasing number of customers as a mobile virtual network operator, or MVNO, which rents infrastructure from three major mobile carriers and provides affordable mobile data plans to consumers.

After launching its Liiv M service, KB Kookmin Bank has garnered the highest number of customers in the budget phone service business, trailing only behind the nation's three major players: SK Telecom, KT and LG Uplus.

The Liiv M service had 5,000 customers in its first year of business in 2019. The number then skyrocketed to 90,000 in 2020, 230,000 in 2021 and 390,000 in 2022, before surpassing 410,000 in 2023.

“In addition to securing new clients, the mobile telecommunications business helps KB Kookmin Bank to legally collect data from mobile phone users, such as their phone bills, and capitalize on the data for financial business that we have been running for decades," the official said.

Shinhan Bank, the nation's second-largest lender, is actively pursuing an expansion of its partnership with Stage Five, a communications affiliate of the tech giant Kakao Corp.

The Shinhan Bank-Stage Five partnership was established in 2021, with Stage Five leveraging Shinhan Bank's mobile app to introduce a budget phone service.

Stage Five became the fourth major mobile carrier, while its consortium, Stage X, secured the position as the new operator of the 28 gigahertz (GHz) band for the fifth-generation network (5G) in January.

“We believe consolidating partnerships can pave the way for us to explore new projects that would not have been possible if we only focused on financial businesses,” Shinhan Bank said, pointing out that Stage X plans to distribute cellphones that support the 5G 28 GHz spectrum through cooperation with Samsung Electronics, Apple and Google.

Another major lender, Woori Bank, has expressed its interest in entering the budget phone service market as part of a strategy to reduce its reliance on interest income.

“We find the mobile telecommunications business especially promising considering a greater reliance on digital technology among our customers,” the bank said.

Meanwhile, some industry sources said that the reckless expansion into the mobile telecommunications market could hurt the profitability of the banks.

The sources pointed out that KB Kookmin Bank's operating losses, stemming from Liiv M, amounted to 13.9 billion won ($10.49 million) in 2020 and 18.4 billion won in 2021.