Internet banks encourage consumers to switch loans

[Photo by Yonhap]

South Korean internet-only banks Kakao Bank and K Bank collected 572.2 billion won ($430.3 million) in mortgage loans in January through platforms that allow consumers to change plans, data showed on Monday. .

This amount is nearly double the performance of the country’s five largest commercial banks: KB Kookmin Bank, Shinhan Bank, Woori Bank, KEB Hana Bank, and NH Nonghyup Bank.

According to Financial Services Commission data, a total of 2,975 housing loans were transferred to Kakao Bank and K Bank in January, but only 1,822 loans (worth 321.2 billion won) were transferred to the five major commercial banks. . The average loan amount per person was also higher at 192.34 million won for online banks compared to 176.29 million won for banks in five major cities.

Launched in January, the mortgage switching platform allows consumers to easily compare and search interest rates online and switch to a financial institution offering a lower interest rate.

Since online banking is an online service specialized for online customers, it was expected from the beginning that it would benefit from this. Because Internet banks do not have offline branches, they can reduce costs by allocating resources to building convenient user interfaces (UIs) and lowering interest rates.

There is growing skepticism among commercial banks about in-person lending operations as an unexpected amount of mortgage loans are moving from commercial banks to internet banks. “Commercial banks will likely increase non-face-to-face operations and use the cost savings to lower interest rates for consumers,” a banking industry source said.

This move also raises concerns about commercial banks’ future strategies.

Mortgage loans, especially those backed by reliable collateral, are attractive products for banks. In this respect, losing customers attracted through offline operations to Internet banks means that traditional commercial banks lose the costs incurred in attracting those customers.

Internet banks are also expected to perform significantly in the lease loan switching service launched on January 31st. Kakao Bank and K Bank’s housing loan switching rates are in the 3% range, while commercial banks’ interest rates are in the high 3% range. Up to the low 4% range.

Commercial banks are currently planning to adjust their lending business strategies. Commercial banks are already facing increasing calls to cut down on face-to-face mortgage lending operations, as the spread of non-face-to-face services has significantly reduced in-person mortgage lending operations.

A banking industry official said, “If customers acquired through face-to-face business flow to online banks through mortgage switching platforms, commercial banks will be forced to change their business strategies.” “They will follow the online banking model of reducing the proportion of face-to-face operations as much as possible and investing the cost savings in lower interest rates.”

Another industry source said, “From a commercial bank’s perspective, they cannot simply reduce the number of branches or stop face-to-face operations.” “It will transform mortgage lending into a non-face-to-face business, further develop non-interest income products, and strengthen corporate finance.”

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