Bankbooks, a symbol of thrift, to be phased out

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Bankbooks, a symbol of thrift, to be phased out

Starting in September, local banks will not issue new paper bankbooks if a customer opening an account does not ask for one. They will gradually phase out bankbooks entirely by 2020, the Financial Supervisory Service (FSS) said on Wednesday. But customers will still be able to demand a paper book if they wish, suggesting that the new procedures are aimed at weaning customers from their use rather than banning them.

The service wants banks to start with accounts that have been idle for three years and have a balance of less than 100,000 won ($86). Those accounts will be closed by the end of 2016, the bankbooks deactivated and the balances repaid to customers on demand. Or the account can be reactivated - with a bankbook.

“Unlike the case in developed countries, Korea still maintains the practice of using paper bankbooks, causing inconvenience for both customers and banks,” said Park Sae-chun, senior deputy governor for banking and non-banking sector at the FSS. “If you visit a bank without a bankbook, there are complicated procedures to report the loss and you must pay to have a book reissued.”

“We have also found that about 60 million accounts have not been used at all by the real owners for years,” he said. “Many have been used by financial scammers using borrowed names.”

Between September 2015 and August 2017, all local banks and financial institutions will encourage customers to open an account without a paper bankbook, offering benefits such as higher interest rates or lower commissions on transactions.

From August 2017 to August 2020, bankbooks will be extinct, but only in principle. They will still be issued on demand, perhaps to older customers who are more comfortable with them.

From September 2020, book issuance fees will rise, but with some exemptions.

Under the current law, a customer who opens a new account at a local bank may be asked to pay 5,000 to 18,000 won in commissions for a bankbook, although that is not a universal practice.

As online and mobile banking becomes more popular here, many customers have relegated paper bankbooks to their file cabinets or have lost them and haven’t noticed. But if they try to withdraw money from the account at a bank counter rather than an ATM, they are likely to be hit with a fee for issuing a new book.

In Korea, more than 90 percent of the 270 million bank accounts have an associated bankbook, the FSS said. Banks have collected about 6 billion won annually to reissue lost bankbooks.

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