[Post-Covid-19 New Normal] Covid-19 might not break the bank, but it will change it forever

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[Post-Covid-19 New Normal] Covid-19 might not break the bank, but it will change it forever

KB Kookmin Bank's branch in Seocho District is unmanned with advanced and ordinary automated teller machines installed. [KB KOOKMIN BANK]

KB Kookmin Bank's branch in Seocho District is unmanned with advanced and ordinary automated teller machines installed. [KB KOOKMIN BANK]

Losing your debit card is normally a minor inconvenience, remedied by a quick trip to the bank. Losing your debit card in the middle of a pandemic, as a women in her late 30s surnamed Jung discovered, is a very different story.

Despite wanting to avoid human contact as much as possible, Jung was unable to order food or shop online because she lacked a debit card. She also didn't want to walk into a bank and speak to a teller as the number of Covid-19 cases in Korea started to shoot up.
That's when she heard about the self teller machine (STM) at KB Kookmin Bank’s branch in Seocho District, southern Seoul. Visiting the branch on Aug. 25, Jung was able to have a new debit card issued without ever having to near another human being.
“I needed this debit card for some time after losing the same one a while ago, but haven’t been able to visit bank windows as coronavirus cases started to peak recently and the country issued a Level 2 social distancing scheme,” Jung said.
“Then I found out that I could get a new card at this machine even without having to go near the bank staff. I tried it doubtfully and was kind of surprised to find out it really worked.”
Handling financial transactions without having to come into contact with other people has gone from an optional feature in the finance industry to an absolute must.
Either using the above-mentioned advanced automatic teller machine (ATM) or mobile devices to transfer money, pay utility bills and even join new funds has become a new norm in Korea's finance sector, which traditionally has been one of the slowest sectors to digitize.
This shift has been slowly going on for a while, but the spread of Covid-19 pushed even customers previously unwilling to take their banking online — especially older customers. Overall, the change has accelerated, and both new and old financiers are taking it seriously.
“The coronavirus pandemic could have acted as a trigger for financiers to roll out services on digital platforms at a faster speed,” said Lee Jong-wook, an economics professor at Seoul Women’s University.
"Tasks that can be done digitally will quickly change from offline to online for more cost-effective management, and those that still need offline consulting and evaluations will remain."
Most financial tasks at brick-and-mortar banks used to be done by bank tellers. [JOONGANG ILBO]

Most financial tasks at brick-and-mortar banks used to be done by bank tellers. [JOONGANG ILBO]


The end of brick-and-mortar banks?

Like all other face-to-face services, the coronavirus made people immediately wary of bank tellers.

STMs were one of the ways people could avoid having to deal with a physical bank teller for more complex financial errands — like issuing Jung's new debit card — while simple transactions like transferring money and paying bills can be handled through mobile apps.
An STM is a more advanced version of an ATM that is able to do approximately 80 percent of the financial tasks that tellers handle.
From creating a new bank account and issuing a new credit card to joining a new fund and applying for credit loans, the automated machine is a one-stop shop for nearly all financial demands that the average retail customer is likely to have. A select number of complex jobs, such as applying for mortgage loans, are not available at the machine.
Major banks in Korea have been actively adopting STMs recently.
KB Kookmin Bank has the highest number, with 102 of them operating nationwide. Woori Bank has 43, Shinhan Bank has 22 and NH Nonghyup Bank has 19.
Woori Bank recently opened a new type of branch called a Smart Kiosk in Gangnam District, southern Seoul. The branch, which opened in March, contains two STMs which handle the bulk of business, while a small number of bank tellers are available for more complex tasks.
“Since the branch opened in March, the number of visitors and users of the machine have been on a gradual increase,” said Kim Kyung-mee, who helps customers unfamiliar with the advanced machine.
“There are tasks that are more convenient with the machine such as issuing a debit card, changing the password of an account that’s been locked and printing various sorts of financial certificates. These are also available through the mobile app, but you would have to wait a couple of days to get your hands on the product. Here, you get it done right away.”
KB Kookmin’s Seocho branch and Woori Bank’s Gangnam branch are just a few of the examples of how Korea’s major commercial banks are finding digital uses for their brick-and-mortar branches.  
According to Financial Supervisory Service data, the number of offline banks, which stood at 7,281 in 2015, has dropped to 6,709 as of 2019. In the first three months of this year, nearly 50 brick-and-mortar banks were closed.
As plans to close offline operations pick up speed during the coronavirus pandemic, the financial authority even had to warn financiers to slow down the shutdowns.
Although customers’ preference is largely shifting to unmanned and mobile platforms, that doesn't necessarily spell the end for physical branches. Strategic use of them will contribute in expanding the customer base, experts say.
“Yes. We experienced a large increase in the number of users of our mobile app and internet banking recently,” said Hwang Won-cheol, chief digital officer at Woori Financial Group. “However, it will act as an opportunity to revamp the layout of brick-and-mortar branches. 
"For example, at a branch located in an office area, we distribute more employees that are dedicated to evaluating company loans, whereas at a branch near a college, we handle more light financial products. The number of offline operations may shrink, but their role might just get more important.”
That is why its Gangnam branch was selected as Woori bank’s first Smart Kiosk, because the neighborhood is always bustling with young students.  
Shinhan Bank has recently announced its plan to transform its Seosomun branch in central Seoul to what's called a Digilog, where STMs and bank tellers will co-exist to help customers more efficiently. The branch is ultimately going toward a "zero paper" and "zero cash" scheme, according to Shinhan. 
"Offline retail channels with bank tellers may decrease, but more strategic ones with various types of automated teller machines will increase," Professor Lee said.

Less cash, more apps



While banks are figuring out how to make their brick-and-mortar banks more useful, the rapid emergence of internet banks and mobile financial services are an inevitable trend. It is an opportunity for fintech newcomers and a risk for traditional banks at the same time.
Kakao Bank, one of two internet-only banks operating in Korea, saw a rapid surge in users recently.
As of June, the number of users who had opened bank accounts with Kakao reached 12.5 million, up from 11.3 million in 2019.
Monthly active users also showed noticeable growth, up from 10.6 million as of 2019 to 11.7 million as of June, becoming the most-used mobile bank app in Korea.  
Kakao Bank says the number of users in their 20s and 30s has been constantly rising since its business started, but the influx of older customers signals that a fundamental change is taking place in the industry.
People over 50 accounted for 13.4 percent of new monthly customers back in January, according to Kakao Bank.
The figure rose to 14.6 percent in March, when the coronavirus was especially bad in Korea, before rising as high as 17.5 percent in May.
“Older customers who feel much more comfortable with visiting physical banks slowly shifting to mobile platform means a significant change is happening in the banking industry,” a spokesman for the bank said.  
K bank, the other internet-only bank operating in Korea, also recently reported better-than-expected demand for its newly introduced mobile mortgage loan product. The evaluation process for the loan is entirely done on its mobile platform, including submitting documents, which can be done using photographs. 
The product attracted 26,458 customers in the week it launched, according to the bank, with more than 13 percent of applicants over 50 years old.
“Even though it was a 100 percent non-face-to-face loan product, people of all ages showed interest,” the bank said.
Traditional banks are also upgrading their mobile financial services.
Hana Bank’s flagship mobile credit loan product Hana 1Q experienced a surge in demand, recording 2.9 trillion won ($2.4 billion) in loans as of June, a more than 50 percent jump from six months ago. The number of clients for the loan also increased by 12 percent during the cited period.
“Mobile loan services have become convenient because the smartphone itself acts as an identification method and therefore simplifies the evaluation process,” a Hana Bank spokesman said. “The bank is closely monitoring the demand after the coronavirus so that more advanced and useful products can be developed.”
Using mobile device-based payment methods has become the new norm in Korea. [YONHAP]

Using mobile device-based payment methods has become the new norm in Korea. [YONHAP]

In line with people getting more familiar with mobile financial services, holding on to cash is becoming increasingly meaningless.
With people especially concerned about the highly infectious Covid-19 pandemic, passing paper money from person to person has become increasingly unpopular.

Bank of Korea data shows that non-face-to-face transactions through mobile devices and PCs have increased significantly since Covid-19 first swept the country in February.
During the February to May period, the transaction amount for non-face-to-face methods increased by 12.7 percent on year while face-to-face transactions decreased by 8.4 percent.
Of face-to-face transactions through offline channels, credit cards and debit cards, where direct or indirect physical contact is inevitable, experienced a 10.2 percent drop during the cited period, while payments through mobile devices via QR codes or bar codes on mobile payment service apps increased by 9.1 percent.
Starbucks, for example, reported that the number of orders submitted through its siren order system — a contactless method of ordering drinks and food through its mobile app — increased by 20 percent on year during the January to April period, accounting for 23 percent of orders made at the coffee franchise.
On the back of the fast-changing trend, the central bank recently signed a partnership with major retailers including convenience store franchises Emart24 and Mini Stop and Hyundai Department Store to launch a service where customers can receive change under 10,000 won directly to their bank account.
“The 'untact' way of paying for things used to be widespread only among the younger generation, but the fact that the number of users are continuously increasing indicates that the coronavirus has added momentum to accelerating the expansion penetrating the older demographics as well,” said Lee Na-ye, a researcher at Korea Investment & Securities.
“A preference for untact payment services is expected to increase in the future."
BY JIN EUN-SOO   [jin.eunsoo@joongang.co.kr]

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