Finance sector prepares for Kakao Bank

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Finance sector prepares for Kakao Bank

With Kakao Bank, Korea’s second internet-only bank, set to open its service to the general public on Thursday, traditional banks are scrambling to keep up with the changing industry.

Kakao Bank, an internet-exclusive bank created through a consortium led by Kakao, the operator of the nation’s most popular messenger application, unveiled its international money transfer service earlier this week. The details of the service disclosed came as a shock to the traditional banking sector as well as consumers as the bank said it will only charge 5,000 won ($4.48) when its customers wire less than $5,000 overseas. For an amount exceeding $5,000, the company said it will charge 10,000 won. The bank will enable customers to send money to 22 countries around the globe, including the United States, Canada, the United Kingdom and Hong Kong.

The 5,000 won fee for international transfers is about one-tenth of what traditional banks normally charge.

“We decided to minimize the complex cost structure in international wiring that includes fees such as brokerage fees,” a Kakao Bank spokesperson explained. Customers can send money to accounts in other countries even on weekends or holidays. They can also receive money from foreign bank accounts.

While further details on Kakao Bank’s services, particularly how it will utilize its connection with KakaoTalk, the nation’s top messenger app, are yet to be revealed, the banking sector is already looking for ways to make its online services more competitive.

The state-run Industrial Bank of Korea launched several digital services earlier this week.

Starting on July 28, IBK customers will be able to transfer as much as 3 million won domestically, a drastic expansion on the previous limit of 500,000 won. Starting August, the state-run bank will allow its customers to create accounts through their mobile devices with the option to set mobile phone numbers as account numbers. And to match Kakao Bank’s international money transfer service, IBK decided to slash the fee by 40 percent while allowing customers to send money internationally via a phone call.

Shinhan Bank’s branch in Japan - Shinhan Bank Japan - joined forces with Naver’s messenger app Line and launched a currency exchange service. The Line Pay exchange service enables users to request a currency exchange with their mobile phones and retrieve the money when they land at designated airports.

Experts expect Kakao Bank to further shake up the local banking sector, which is still struggling to adapt following the launch of the nation’s first internet-only bank, K bank.

“Notable features of Kakao Bank include its international wiring service that only charges a 5,000 won fee for the amount less than $5,000 as well as its mobile credit loan service that allows people to borrow more than 100 million won,” explained Yoon Jung-seon, an analyst from KB Investment and Securities. “But the most important element of its competitiveness is using the KakaoTalk platform that has more than 42 million subscribers.”

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