Introduction of K bankDigital-Only Bank Experiences in Korea

2019

Ⅰ. Overview of K bank

What is digital-only bank?

Traditional Incumbent Bank

Customers have to visit to branches to get

banking services

Non-face-to-face channels are secondary

Call Center

Mobile/web

ATM

Bank Centric

(off-line channel)

Customers access to banking service

anytime and anywhere

All services are done by non-facial

processes

No Branches

Call Center

Mobile/web

ATM

Customer Centric

(digital channel)

Digital-Only Bank

Oct

Jan 2016

Jul

Jun 2015

Dec

K bank incorporated for biz preparation

K bank obtained final approval (12.14)

K bank grand open (4.3)

Nov

Announced a plan for digital-only bank

2 consortium selected(K bank, Kakao bank)

Apr 2017

Kakao bank grand open (7.27)

Applied biz plans for pre-approval

Intents of digital-only bank introduction

“Improve convenience for customers with technology”

“Promote market competition especially for innovation”

“Enhance fintech competitiveness and globalization”

New bank license in 24 years in KoreaPre-approval in Nov 2015 and grand open in Apr 2017

Deposit in K bank close to ~1.9 T KRW

(Loan close to ~1.3 T KRW)

~858 thousand total customers

K bank made successful debut in KoreaK bank played important roles for soft-landing as the FIRST digital-only bank

Source: News article, Korea FSS

260

379

530

642

723 762

858

# of account (Thousand)

Deposit (Billion KRW)

Loan (Billion KRW)

220

600 656

858

1,030 1,134

1,264

315

643

861

1,089

1,294

1,574

1,862

'17.04 '17.06 '17.09 '17.12 '18.03 '18.06 '18.12

K bank ShareholdersTop leading companies in the field of finance, ICT, platform and global business

Finance

Telecom

Platform

ICT Global

Capital

K bank’s offerings

Deposit

Dual K

Music K

Code K

Prime

Sub-prime

Overdraft

SOHO

Check card

Quick remittance

Simple Payment

Banc-assurance

Foreign Currency

- Switchable in checking & savings account

- Digital interest with music voucher

- Provide prime rate with Partner code

- Easy & Fast loan without any document

- Advanced CSS for the thin-filers

- Loan by your Finger Print Authentication

- Merchant oriented loan

- Payback your Phone Bill (KT user)

- Quick & Easy remittance by simple password

- pay with QR code, account based settlement

- Accurate & Easy comparison by simple personal information

- Easy & Fast foreign currency remittance

Loan

Trasac-tion

Fee-Biz

DescriptionItems

K bank’s channel

Primary channel

Savings

Checking

Provide prime rate if you maintain account for 1

month

Easy to withdrawal

with basic rate

Over 10,000 store all across the country

Accessible services on ATM

• Deposits & Withdrawal• No Card transaction• Check card issuance

Mobile App

Internet (Web)

Handy access through convenience stores

Ⅱ. Innovation led by K bank

Digital innovation led by K bank

Analysis

Technology

I

Ⅱ Seamless banking

100% Non-facial process

Ⅲ Simple banking

Convenience

Competitive priceICT combined

Product / ServiceⅣ Ⅴ

Create new

business areaⅥ

Open account without visiting branch

Offer loan without any document

Automatic recognition of public ID

Open

Account

PaymentDeposit

RemittanceLoan

Asset

mgmt

Video Call

Scrapping Method

100% Non-facial process

Ⅰ 100% non-facial processK bank designed 100% non-facial process without document required

53%

57%

43%

47%‘17.4

‘18.12

‘17.4

‘18.12

09:00~16:00

16:00~09:00

Ⅱ

Source: K bank analysis

Deposit account opening ratio by timeline

Seamless Banking : 24 hours 7 daysChanged customer’s bank usage pattern

Ⅲ Simple Banking : Customer Centric ServiceDesigned service by going back to customer needs

Banks have various apps with each

functions : verification, OTP, etc.

All in one app

VS

Enable fast and convenient one-stop

banking service

Speedy Banking

Most used service in mobile

banking : checking balance and

money transfer

Check balance and transfer money

without log-in

Ⅳ

100

~10

~45

~30

~15

TotalSG&A

Personell(HQ)

Personell(Branch)

Rent Others

Branch cost burden on traditional banks

Branch

costs

account

for

~75%

of total

SG&A

Competitive pricingBased on low cost structure

Source: Experts interview

Deposit interest

Loan interest

Digital-only bank has advantage on

pricing due to no branch cost

• Easily switch some part of your checking

account into savings account

• Merit combination : Convenience of checking

account + Benefit of savings account

Dual Account Digital Interest Deposit

Music voucher

instead of cash interest

Better benefits

than cash interest

Collaboration with kt Music

Ⅴ ICT combined new product ICT enables new trials which existing banks have never tried before

Break old-notion of bank account :

Switchable with your finger sliding

Savings Checking

KRW KRW

Voice Banking with AI speaker24 hour Convenience Store Bank

Major features

• Public ID scan

• Transaction without card

• Check card issuance

• Palm vein authentication

ᆞCheck balance

ᆞEasy money transfer

ᆞProduct recommendation

Ⅴ ICT combined new serviceICT enables to permeate banking into daily life

Credit Scoring System

Telco DBPayment

DB

Other share-

holder DB

Financial

DB

■ Minor lender ~35%

■ Savings bank ~26%

■ Capital ~22%

■ Card Loan ~15%

■ Bank ~5%

Avg. annual loan rate

“Blind spot”

for loan

(5 ~ 15%)

Near prime area

Conventional

CSSwith financial

DB only

Telecom Behaviors1

• Traffic (Stable housing)

• Roaming (Overseas trip)

Phone Bill Info.

• Usage level

• Payment history

Ⅵ Develop new business areaK bank offers mid credit loan to the right customer with big data analysis

1. Using TBI (Telecommunication Behavior Index made by KT Big Data Center)Source: Bank of Korea

Thank you