If the plans go well, the government will likely approve one or two Internet-only banks within this year, which would open a new era in the nation’s financial industry.
Under the plans drafted by the Financial Supervisory Commission, nonfinancial firms will be allowed to hold a stake of up to 50 percent in an Internet-only bank, with a minimum capital input of 50 billion won ($45 million).
This greatly lowers the entry barrier to the banking industry, where current regulations prohibit nonfinancial firms from holding more than a 4 percent stake in a bank and require the bank to have at least 100 billion won in starting capital.
This would certainly facilitate the establishment of online banks in the country. As one can imagine, Internet-only banks ― which do not have branch networks and offer services remotely via online banking ― can save costs, thus offering higher interest rates and lower service charges.
It would certainly raise the competitiveness of the local financial sector. Moreover, Korea should have opened the age of online banks much earlier, given the world-class level of its information technology.
Internet-only banks are already popular in countries like the United States and Japan, and fintech ― a combination of finance and technology, which means using advanced information technology in the financial sector ― has become an industrial buzzword.
While there are obvious reasons for the nation to foster the Internet-only banking industry, authorities should make sure there are no lapses in the new sphere of financial services.
This caution is based on the fact that some financial institutions controlled by dishonest or unviable nonfinancial firms often ended up as hotbeds of irregularities, causing heavy damage to their clients and the economy as a whole.
Failure or exploitation of a bank causes a catastrophe not only to its clients but also the national economy. The same precaution should be applied to Internet-only banks so that the new industry can be a transparent and healthy member of the financial industry.
