Kakao Bank set for July 27 debut

Kakao Bank, the second internet-only bank in Korea, will officially open its service to the public next week.

“Kakao Bank will launch its service starting July 27,” the bank said in a press release Wednesday.

Kakao Bank obtained initial approval from the Financial Services Commission (FSC) in November 2015. The bank received final approval in April and has been testing its platform since May.

Kakao Bank’s introduction will stir up an industry already shaken by K bank, the first internet-only bank created through a consortium led by telecommunication provider KT.

Since its launch in April, K bank has acquired more than 400,000 subscribers. Total deposits at the bank exceeded 650 billion won ($578 million), and the bank issued more than 610 billion won in loans, far outpacing its pre-launch goals.

Some market watchers predict Kakao Bank’s impact may be even greater, given its connection to Korea’s most widely-used messenger app.

“Kakao Bank will tout its strength such as low interest rates … and its link to KakaoTalk to bring in subscribers,” said Oh Dong-hwan, an analyst from Samsung Securities. “Considering K bank’s case, it will quickly acquire subscribers and deposits in the early stage, improving investor sentiment.”

Kakao Bank said Choi Jong-ku, the FSC chairman, will attend the opening ceremony slated for next Thursday. Choi expressed interest in internet-only banks during his hearing on Monday.

The current banking act separates banking and commerce, limiting non-financial companies such as Kakao or KT from holding more than a 10-percent share in a bank.

The concern is that Kakao and KT will not be able to provide direct support to Kakao Bank and K bank when they need to raise additional capital, which is deemed essential until the banks reach their break-even point.

Analysts predict it will take from three to four years for the banks to reach that point.

When asked about the ownership limits at the hearing, Choi said he wants to make an exception for internet-only banks given their potential to innovate and create jobs.

Choi called internet-only banks a “catalyst” to growth in the local banking sector.

His appointment as the head of the country’s financial regulator has raised speculation that Choi may try to authorize more internet-only banks while in office.

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