Threatening Traditional Banks
Kakao Bank made its debut on July 27 and no less than 187,000 people opened accounts in the bank that day alone. The number is quite something in that K Bank, the first online-only bank in South Korea, debuted on April 3 with 20,000 accounts.
Kakao Bank Co-CEO Yoon Ho-young said that the bank is relatively small in size yet provides every type of banking service from lending and saving to overseas remittance and card. Its Kakao Bank Credit Loan makes use of scraping and provides up to 150 million won in a non-face-to-face manner at an annual interest rate of 2.86% or more. The bank is planning to establish its own credit evaluation and scoring system in the near future by making use of big data and artificial intelligence although it is currently using external credit rating agencies’ models.
Its debit card services and overseas remittance are attracting the interest of many, too. K Bank is currently providing no foreign exchange-related service. Kakao Bank works with major banks with global networks so that remittance costs can be reduced by approximately 90%. In general, 50,000 won to 60,000 won and about 40,000 won are required when US$5,000 is sent from a commercial bank branch and via a mobile app, respectively. At Kakao Bank, however, only 5,000 won and 10,000 won are required when the amount of remittance is US$5,000 or less and exceeds US$5,000, respectively. As an exception, a uniform cost of 8,000 won plus some fees is applied to remittance to the Philippines, Thailand and Japan.
Kakao Bank debit cards come with deferred fare payment and international payment. The bank is planning to file an application soon in order to obtain an approval for credit card business from the Financial Services Commission. In addition, Kakao Bank is planning to increase its capital next year.
According to the bank, the recapitalization can be carried out with ease even if it has to be carried out earlier than scheduled. “At present, Korea Investment Holdings owns 58% of Kakao Bank and, as such, recapitalization can be done with or without the other eight shareholder companies,” it explained, adding, “The shareholder companies already gave their consent to boot.”