Banks are likely to strengthen the platform business in which they lag behind compared to big tech companies.
Financial regulators have revealed their intention to introduce a “digital universal bank system” while changing the regulatory environment to help financial institutions compete with big tech companies in a fair fashion.
Financial regulators may consider allowing banks to offer non-banking and subsidiary businesses. As barriers between banking and non-banking sectors are giving way fast, banks are expected to stage a fierce competition with big tech companies.
Chairman Koh Seung-beom of the Financial Services Commission (FSC) had his first meeting with bank presidents and heads of related financial institutions at the Korea Federation of Banks in Jung-gu, Seoul, on Oct. 28.
FSC Chairman Koh said, “Banks will be allowed to expand business portfolio to concurrent and subsidiary businesses so that they can innovate business models to comply with environment changes.”
Specifically, banks’ investment consultation business, which has been limited to real estate, will be expanded to all financial products and the scope of trust properties in which customers can entrust will be expanded. These steps are designed to pave the way to make banks “integrated asset management entities.”
With the opening of the investment consultation business, banks, which have focused on deposits and loans, will be allowed to offer diverse investment consultation services to diversify revenues.
Fee incomes, which have been sluggish despite banks’ efforts, and non-interest incomes, such as trust fees, are expected to be on the surge.
Financial regulators have decided to consider expanding banks’ non-financial platform businesses, which have been selected as their innovative financing services, based on outcomes of their operation and environment changes.
It means that banks will be allowed to be engaged in new business models, like Shinhan Bank’s food delivery platform.
Financial regulators will purse institutional reform to introduce a “digital universal bank system” in which financial groups can offer diverse financial services at once via a ‘super’ application.
Banks have so far refrained from coming up with a super app, like those released by Toss, the nation’s third online bank for fear that it may violate related laws.
Financial regulators are considering rationalization of banks’ financial networks and sharing of information between banks and non-banks.
They made it clear that the environment unfavorable for banks and other conventional financial institutions would be rectified.
FSC Chairman Koh said, “The government will make every effort to create a fair competition environment less differences from irrational regulations should be created between bank and big tech circles in the course of financial innovation.”
Gov. Jeong Eun-bo of the Financial Supervisory Service (FSS) told the 2021 Seoul International Financing Conference on the same day he would listen to global discussions on fair competition issues between financial and big tech circles.
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