Small and Medium Savings Banks Start to Lack Competitive Edge Due to Financial Burden from Non-Face-to-Face Transactions

Jan 10, 2019

Difference in percentage of non-face-to-face transactions between large savings banks and small and medium savings banks is becoming wider.
While large savings banks are increasing number of relevant services and products by increasing amount of investments into IT, small and medium savings banks are being hesitant due to financial burden.
According to relevant industries, percentage of non-face-to-face transactions is responsible for between 20 and 30% of entire business of large savings banks.
Although this percentage is low compared to commercial banks and internet-only banks, upward trend of non-face-to-face transactions is very steep considering how percentage of face-to-face transactions had been very high recently. It is shown that Welcome Savings Bank, which introduced Welcome Digital Bank last year, has non-face-to-face transactions responsible for more than 80% of its business.
Amount of new money that is handled through internet and mobile devices for large savings banks already surpassed the amount of new money that is handled through recruiters.
According to Financial Supervisory Service, amount of new money that is handled through internet and mobile devices between January and September of 2018 for SBI Savings Bank was $623 million (696.7 billion KRW). This exceeds the amount of face-to-face transactions through recruiters which was $460 million (514.1 billion KRW).
Other large savings banks are also in a similar situation. OK Savings Bank and Welcome Savings Bank handled $227 million (254.4 billion KRW) and $111 million (124.7 billion KRW) respectively through internet and mobile devices during same period. Both of these amounts exceed the amounts through recruiters which were $129 million (144.6 billion KRW) and $67.4 million (75.4 billion KRW) respectively.

Small and Medium Savings Banks Start to Lack Competitive Edge Due to Financial Burden from Non-Face-to-Face Transactions

On the other hand, percentage of non-face-to-face transactions for small and medium savings banks is insignificant. According to industries, percentage of non-face-to-face transactions for small and medium savings banks is less than 5%. Even this percentage is due to Korea Federation of Savings Bank’s mobile application called ‘SB Tok Tok’. Actually, 9 savings banks that handled less than $8.88 million (10 billion KRW) regarding household credit loan between January and September of 2018 only handled $625,786 (700 million KRW) through internet and mobile devices. This amount is only a bit more than 4% of the amount that was handled through recruiters which was $14.4 million (16.1 billion KRW).
It is expected that different in percentage will be even wider this year as SBI Savings Bank and other large savings banks are looking into launching new platforms through investments into IT.
These investments are worth at least $8.93 million (10 billion KRW) which is huge amount for small savings banks. Concerns about competitive edge of small and medium savings banks are expected to become reality.
“Some large savings banks are investing significant amount of money into IT and distancing themselves from small and medium savings banks.” said a representative for the industry. “Because non-face-to-face transactions will be directly related to competitive edge in the future, it will only be more difficult for small and medium savings banks.” This representative also added that although Korea Federation of Savings Banks announced back in September that it would introduce platforms that would support small and medium savings banks, it is unclear whether it will be able to do so considering how IT trends are changing very rapidly.
Staff Reporter Park, Yoonho | yuno@etnews.com

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