Internet-only banks face scrutiny over system failures as pay rises

Internet-only banks are facing growing scrutiny over a string of customer-facing system failures, drawing attention to operational risks at the digital lenders as average pay across the sector continues to rise.

All three internet-only banks paid average annual compensation above 100 million won ($66,700) in 2025, according to disclosures from the Korea Federation of Banks and the lenders.

The latest disruption involved Kakao Bank, whose mobile app crashed Tuesday afternoon, according to a report the lender submitted to and disclosed by Rep. Lee Yang-soo of the People Power Party.

Kakao Bank said the initial outage stemmed from its latest regulatory program update. After identifying the problem, it rolled back the update and restored normal access to the mobile app by 3:55 p.m., about 26 minutes after the disruption began.

A second outage followed at about 5:30 p.m. during the bank’s internal review of the incident, blocking app access for another eight minutes and raising further concerns over its recovery process.

In its report to Lee’s office, Kakao Bank said a change in the internal monitoring system’s settings was the direct cause of the initial disruption, and that the second delay occurred while those settings were being restored to their original state.

“The monitoring settings that had destabilized the system have been restored, and services are now operating normally,” the bank said in the report, adding that it would continue investigating why the setting change caused the disruption.

While the glitches caused no financial losses, about 180 customer complaints were filed over failed attempts to subscribe to public offerings during the outage, and the bank is reviewing compensation.

The incident came about a week after Toss Bank suffered an exchange rate glitch on March 10, when its app briefly displayed an abnormally low yen rate, resulting in about 50,000 transactions worth 28.38 billion won.

Toss Bank said the error occurred because its internal system for calculating posted exchange rates based on data from multiple external institutions failed to function properly during that period.

The failures have drawn heightened attention because internet-only banks, which operate without offline branches, provide all financial services through mobile platforms. Even brief outages can effectively halt transactions such as loan disbursements, transfers and foreign exchange, amplifying customer inconvenience and undermining trust.

South Korea’s three internet-only banks logged a combined 163 system failures over the past five years, according to data the Financial Supervisory Service submitted to Lee’s office. Toss Bank and Kakao Bank each recorded 64 cases, while K Bank logged 35.

In terms of financial damage, Toss Bank accounted for the largest impact, with 10,700 customers affected and compensation totaling 48.74 million won. The figure does not include the recent yen exchange-rate glitch.

The sector’s operational lapses have contrasted with rising compensation at the internet-only lenders. K Bank’s average employee pay rose 3 million won from a year earlier to 102 million won, crossing the 100 million won threshold for the first time. Kakao Bank led the three with an average compensation of 122 million won, followed by Toss Bank at 120 million won.

“Growing anxiety among financial consumers has been fueled by the recent string of system failures,” Rep. Lee said. “Financial authorities should inspect internet-only banks’ overall IT operations and prepare measures to improve the system.”