Kakao Bank and K Bank continues shake up banking industry

Kakao Bank and K Bank continue to shake up the banking industry where interest rate competition is heating up. Traditional banks continue to reduce lending rates in response to the rapid growth of internet banks, especially Kakao Bank which debuted on July 28. Analysts said competition both Internet and traditional banks to lower interest rates and fees would be even harsher.

Tinuku Kakao Bank and K Bank continues shake up banking industry

The tough competition of Kakao Bank and K Bank as an internet bank or bank without branch offices to continue to lower lending rates and raise interest rates on savings continue to encourage the trandisonal banks to do the same. Such a step becomes inevitable as internet bank continue to take on the larger portion of the banking market.

Korea Federation of Banks (KFB) and Financial Supervisory Service (FSS) said 17 commercial lenders cut their lending rates by 0.11 percent. K Bank has lowered its interest rate from 3.17 percent to 3.06 percent, while Kakao Bank saw an increase in lending sales of 540 billion won in the first two weeks of this month.

The K-Bank loan disability ratio also hit a record low due to an innovative credit scoring method. The bank, launched in April with a capital of 250 billion won, has about 440,000 accounts and lent the 635.4 billion won on August 14.

Both Internet banks continue to seize the market because of its easy reach, low tariffs and offer loans of up to 150 million won in just five minutes mainly for monthly paid workers of more than 3 million won. This customer accounts for 77 percent of all who download bank applications on their smartphones.

The size of the internet bank is relatively small, despite its rapid growth and analysts expect it to post losses in the first three years. But the increase in capital will offset the losses and will not affect the capital adequacy ratio. Internet banks are predicted to post profits after three to five years of operation.