Bids for new online banks are now up to three

Nearly two years after the last online bank was launched, the government says new banks are coming, which should widen the financial products offered and incite competition that leads to better services.

According to the Financial Services Commission (FSC) on Wednesday, three contenders have submitted applications to start online banks.

FSC Chairman Choi Jong-ku told lawmakers Wednesday he plans to green light a maximum of two internet banks. It’s also possible only one bid will be approved.

The contenders with the most promise are Kiwoom Bank and Toss Bank.

Kiwoom Bank is backed by a consortium of 28 companies led by the brokerage firm Kiwoom Securities. It includes conventional financial companies and tech companies backed by a large investment pool.

Participants include Korea’s leading telecommunication company, SK Telecom, and KEB Hana Bank.

Toss Bank is backed by eight investors led by the innovative fintech company Viva Republica, known for its mobile payment app Toss.

Its group includes Hanwha Investment & Securities, which is already a shareholder of the country’s first internet bank that launched in April 2017, K bank.

The brokerage firm joined the Toss Bank consortium at the last minute. It wants to be the second-largest stakeholder with 9.9 percent shares worth 24.8 billion won.

Toss Bank’s consortium nearly broke apart when its major backer, Shinhan Financial Group, pulled out last week after failing to narrow differences with Viva Republica. It was hoping to play a larger role in the internet bank’s management as a strategic investor, not a minor investor. Other major investors include venture capitalists Altos Ventures, Goodwater Capital, U.S. venture capital Ribbit Capital, security IT company Crosscert, cloud service company Bespin Global and online fashion commerce company Musinsa.

Viva Republica said it will own 60.8 percent of the shares.

Viva Republica’s majority stake, however, could be a problem.

Under existing law, nonfinancial companies cannot own more than 34 percent of an internet bank’s shares.

Recently the telecommunication company KT applied to the FSC to approve an increase in its stake in K bank to 34 percent. K bank’s largest stakeholder is Woori Financial Group with 13.79 percent. KT has a 10-percent stake.

Korea Investment Holdings is the largest stakeholder in Kakao Bank with a stake of over 50 percent. The mobile IT giant Kakao has an 18-percent stake.

There is no precedent for a unconventional IT financial company holding a majority stake in an online bank.

This could prevent the financial authority from approving Toss Bank.

Yet Viva Republica, which is a fintech company, says it can own more than a 34-percent stake because it is a financial company.

The government said it will announce its final decision in May.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]