Subscribe
E-Paper
 |
| Boston Consulting Group (BCG) Managing Director and Partner Kim Yunjoo speaks during an interview with The Korea Times at BCG's office in central Seoul, June 29. / Korea Times photo by Choi Won-suk |
BCG partner says financial groups should also play social role
By Kim Bo-eun
Financial firms, especially banks, are facing one of their most challenging times in the COVID-19 period. The pandemic has further brought down already low interest rates, and platforms created by tech companies are expanding their presence rapidly.
"This is not a matter of what kind of new businesses banks should come up with. Banks currently face a groundbreaking shift," Kim Yunjoo, managing director and partner at Boston Consulting Group, told The Korea Times in an interview last month.
"Money is flowing to securities firms from banks based on zero percent interest rates. The shift to financial platforms, meanwhile, is accelerating," he noted.
The consultant said circumstances are requiring banks to change the way they conduct business, as they will likely lose competitiveness if they stick with their current business models.
"If they stick with what they're doing, they will see customers leave. Their standing may be lowered, as financial platforms and other investment firms compete for customers," Kim said.
New business
As tech giants and startups begin to offer financial services, banks should come up with new business models involving different sectors, the managing director noted.
"For example, this could be healthcare, or e-commerce. They could become companies offering related services, or can partner with existing entities in the sector," Kim said.
"Launching new businesses offering services addressing the daily needs of customers which also are tied to financial services will help financial firms expand their territory and maintain competitiveness."
The partner also said banks can offer data-based services, as they hold data on customers' salaries, loans and where they spend their money.
"Once they develop their capabilities surrounding data, they can partner with new firms to pool their data or offer data solutions to fintech firms or provincial banks," he said.
Banks can also seek opportunities overseas, as they have been doing in recent years, the consultant said. Lenders have set up a presence in fast-growing economies in Southeast Asia, as they seek markets outside of Korea, which faces slow growth, low interest rates and a low birthrate.
Kim said it is difficult to begin a new business in a new region with a new customer base.
"If they can start after securing a customer base or acquiring a digital company there, they may have a chance at success," he said.
"Now, if you are considering a digital business, you need to secure a customer base or a platform that ensures customer traffic."
Will internet banks challenge existing lenders?
Currently, both hold competitive advantages in different spheres. In terms of assets and number of customers, existing lenders are superior.
However, internet banks have managed to attract young customers in their 20s and 30s to create new accounts with them.
Data shows that these internet banks' apps have much higher customer engagement levels compared to existing lenders.
"Why do internet banks have an advantage in engagement levels? This is because they are moving quickly according to customer needs. They will pose a threat to existing banks," Kim said.
The partner said existing banks' futures may be up to how fast they are able to attain these capabilities.
"The older generation are living longer lives in an aging society. However, when they pass away they will pass on their assets to their children. What may determine the future of existing lenders is the choice of the children of the older generation ― whether they choose to take their money to internet banks or keep the money at existing lenders," he said.
"This will depend on whether existing banks have managed to catch up with internet lenders by then. If you consider the amount of data the banks hold, the scale of their investments and their financial capabilities, we may begin to see the results of investments soon because they have been learning zealously for the past two to three years."
Financial firms' role in pandemic era
Sociologists note the COVID-19 pandemic is leading to a greater polarization between the haves and have-nots, as there are huge gaps in access to medical services and education.
This also applies to the business world, as bigger companies with name value will remain stable, while mom-and-pop stores will suffer.
Kim noted that financial groups play a social role, in addition to profit-making.
"Financial firms should be questioning what kind of role they can play in a polarized society," he said.
"If taking a strictly profit-seeking mindset, they will only provide services to wealthy individuals and large companies. However, they should be thinking about how they can provide services to elderly customers who are not familiar with digital transactions and how they can support small, suffering firms."
He noted that these values are becoming increasingly important for financial firms as well.
"They should ask themselves whether they shouldn't be using their digital capabilities, which they have developed with huge investments, for such purposes," Kim said.
