Shinhan Bank first in race to eliminate online money transfer fees

ATM booths of Korea's major banks in Jongno District, central Seoul [YONHAP]

Banks are considering eliminating money transfer fees for mobile and internet banking as competition grows in the online banking market.

Shinhan Bank made their online balance transfer fees free starting Jan. 1, becoming the first commercial bank in Korea to do so.

During his inauguration ceremony on Dec. 30, Shinhan Bank CEO Han Yong-gu said the bank will “eliminate transfer fees in order to return the profits to the community,” and called on other banks to join their initiative.

Shinhan had been charging customers 500 won ($0.40) for online or mobile money transfers to other banks and 300 won when using automated transfers, and waived fees only for customers who met certain criteria. These were all waived completely from 2023.

Shinhan earned nearly 10 billion won annually from banking transfer fees, it said, but gave up the extra revenue in a move to attract more customers to the heated online banking market.

Customers meeting certain criteria, such as those performing transactions above a certain amount, those receiving their salary through that particular bank, and the socially disadvantaged, had already been exempt from the fees. An official from Shinhan Bank explained the new initiative will mainly “benefit young job seekers or senior retirees who weren’t able to meet the conditions.”

Other local banks have already begun reviewing ways to waive their commission fees in the future.

KB Kookmin Bank CEO Lee Jae-keun told the press in a new year's address on Tuesday that the bank is reviewing scrapping its transfer fees.

“We are looking at how big the effect of waiving the fees would be on the bank's performance,” a bank official told the JoongAng Ilbo on the condition of anonymity. “We are trying to be prepared for all circumstances in advance amid a rapidly growing remote banking market.”

“Shinhan is currently the only bank that has [eliminated its transfer fees], but customers will start comparing other banks with Shinhan, and, in the end, more banks will follow the decision,” an official from another bank said. “Although it has not been confirmed yet, we are in the stage of reviewing [the elimination of mobile and online transfer fees] actively and in depth.”

The fee waiver is expected to do more than just return profits. In one of the world's most wired countries, many Koreans do their banking on their computers or smartphones without visiting an actual bank. Various types of commission fees have become an obstacle for these banks as they compete with online-only banks like Toss, K-Bank and Kakao Bank.

Just as Korea’s three major networks — SK Telecom, KT and LG U+ — virtually made their text messaging services free following the emergence of the free mobile messaging app KakaoTalk in 2011 and its explosive popularity, insiders believe transfer fees in the banking sector will also go extinct in the near future.

“I think traditional banks cutting or eliminating transfer fees is a positive thing, as they can help customers who have difficulty in financial transactions,” said Seo Ji-yong, a professor of economics at Sangmyung University. “Banks are implementing fee-cutting strategies to attract more customers.”

Seo, however, warned, “If banks give up the profit from transfer fees and attempt to make up for it with deposit and loan income during the current rising interest rates, there is a possibility that the costs may be transferred to consumers in the mid- to long-term.”

BY IM SOUNG-BIN, SEO JI-EUN [seo.jieun1@joongang.co.kr]