Kakao Bank Off to a Rollicking Start

The co-CEOs of Kakao Bank give a presentation at the launch in Seoul on Thursday. /Newsis

Korea's second Internet-only bank Kakao Bank was off to a roaring start when it opened its virtual doors on Thursday morning.

Advertisement

Customers' response was overwhelming, with 280,000 downloading the bank's smartphone app, 20,000 deposit accounts with over W36 billion opened and W14.1 billion extended in loans on the first day of business (US$1=W1,115). So many customers accessed the website on the first day that the computer system froze temporarily.

Customers need to download the app on their smartphones to open an account. The process is completed by ID verification through a customer's Kakao account or text message.

Kakao says it only takes about seven minutes to open an account. Co-CEO Lee Yong-woo said at the launch, "We conducted tests using many people and some were able to open an account in just three minutes".  

Customers can deposit money, obtain loans, wire money abroad, pay by debit card and withdraw money from ATMs. The advantage is the cheaper transaction because the bank does not have to pay for offline branches.

Customers can wire money to other Kakao Bank accounts both in Korea and overseas simply by selecting the Kakao IDs of the recipients without inputting their account details, and there is no transaction fee for domestic transfers.

The transaction fee on overseas transfers is just 1/10 of what off-line banks charge. Deposit interest, meanwhile, can be as high as 2.2 percent a year compared to the mid one-percent range offered by offline banks. And users can withdraw money from 11.4 million ATMs across the nation without paying transaction fees. Loans are offered at interest rates as low as 3.35 percent a year, and it takes just one minute to apply for one.

The other co-CEO, Yoon Ho-young, said, "We plan to expand into other services after gaining the trust of customers".

But red tape could prove a hurdle in the future. Regulations say that a non-financial company can own only up to a 10-percent stake in a bank and exercise no more than a four-percent voting right. That is aimed at preventing big family-owned conglomerates from muscling into the banking business and using it as virtual ATMs to finance risky business ventures.

As a result, both KT, which was the first to open an online bank in April, and Kakao spearheaded the establishment of their own Internet-only banks but hold only a 10 percent stake.