Kakao Bank gains final approval Kakao Bank, an internet-only bank created by a consortium led by the operator of Korea’s top messaging app KakaoTalk, received a green light for its business from local financial authorities on Wednesday, jumping over the last hurdle before its much-anticipated launch.



The Financial Services Commission gave the bank final regulatory approval a year and a half after it first filed in November 2015. Kakao Bank will now conduct a closed beta test before opening up for business, which could be as early as the end of June this year.



The final approval for Kakao Bank comes two days after the launch of rival K bank on Monday. By 3 p.m. on Wednesday, 88,513 accounts were newly opened on K bank and 6,633 loans were issued. Kakao Bank’s debut is expected to add momentum to the transition from paper-based banking to mobile and digital only.



Yim Jong-yong, chairman of the Financial Services Commission and a strong advocate of online-based banking, said during a meeting earlier in the day that introduction of internet-only banks will invigorate competition in the nation’s banking industry, which hasn’t seen a newcomer for 25 years until K bank earlier this week.



In line with the digital banking trend, existing commercial banks have already introduced their own version of mobile banking apps like KB Kookmin Bank’s Liiv, which lets users conduct financial transactions without complex verification processes or a visit to an ATM.



Like its rival K bank, Kakao Bank will target Korea’s so-called midrate loan market and offer loans with interest rates ranging from 5 to 10 percent. “All the procedures required to borrow money will be done through the app,” said Yoon Ho-young, co-chairman of Kakao Bank. “Any complications or troublesome processes to take out loans like submitting various documents will be minimized.”



Yoon said Kakao Bank will use a credit rating model that incorporates financial and non-financial data through “machine learning” technology, a field in artificial intelligence where algorithms are used to make predictions based on available data.



Other than providing loans, Kakao Bank will also simplify transfer of money abroad and offer the service at a lower cost. “Our goal is to reduce transaction fees down to a tenth of what commercial banks presently charge,” said Lee Yong-woo, co-chairman of Kakao Bank.



Market analysts have raised doubts that Korea’s internet banks will survive, since the country’s Banking Act, which separates banking and commerce, limits the share that non-financial stakeholders like Kakao can have in the bank. Kakao currently holds 8 percent in Kakao Bank, and telecom operator KT has 8 percent in K bank.



But Kakao Bank’s Yoon is optimistic. “We may need to raise about 400 billion won [$355 million] by next year, but for us, even under the current law, it will not be difficult to raise the necessary capital,” he said. “If the law is revised, however, Kakao will become the bank’s majority shareholder and create a synergistic effect by innovating our service using Kakao’s information technology.”





BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]









