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| KB Financial Group Chairman Yoon Jong-kyoo, third from right, applauds with KB Kookmin Bank CEO Hur Yin, second from left, and other officials at the bank's launch of Liiv M, a budget phone service at the Banyan Tree Club & Spa, Oct. 28, 2019. First from left is LG Uplus CEO Ha Hyun-hwoi and third from left is Financial Services Commission Vice Chairman Sohn Byung-doo. Courtesy of KB Kookmin Bank |
KB's case illustrates possible conflict over new initiatives
By Kim Bo-eun
KB Kookmin Bank's new line of business offering mobile phone plans in partnership with telecommunications firm LG Uplus continues to face setbacks due to hardline opposition from the lender's union.
Last November, the bank launched its budget phone service Liiv M, which provides users with low-cost phone plans and convenient mobile banking services.
Kookmin Bank has sought to break the prejudice against budget phones, which are commonly associated with low-quality services. Based on its partnership with LG Uplus, the lender is offering an unlimited 5G data plan that is significantly cheaper than existing plans offered by other telecommunications firms. Liiv M is the country's first budget 5G data plan.
The bank intends to attract young customers in their teens as well as senior citizens that are not yet subscribed to mobile phone plans, as this will draw the potential customers to their banking services at the same time.
The service, a hybrid of banking and telecommunications services, provides various discounts in phone plans according to how many KB Kookmin banking services the customer signs up for.
The bank also aims at utilizing telecommunications data it obtains to recommend customized financial products to subscribers.
In April last year, the financial authorities recognized Liiv M as an innovative service, and exempted it from various regulations for a period of two years.
The bank is aiming to secure 1 million customers by the end of this period, or at least 300,000, but progress has been slow due to opposition from its union. Liiv M currently has 80,000 subscribers, according to the lender.
Liiv M met opposition from Kookmin's union, after the lender decided customers would be able to sign up for the services at bank branches. Initially, subscriptions were only accepted online.
The bank said it expanded its sales channels because senior citizens have difficulty accessing online subscription services. The union claims that this is a tactic to increase sales.
The union stated this burdens bank tellers with additional work and that this degrades them to "salespeople for mobile phones."
Conflict between the union and the bank's team in charge of the project escalated when the lender stated it would include employees' sales records of the mobile phone service in their assessments. The union said this imposes excessive sales pressure on the bank's staff.
It has gone as far as asking ruling party lawmakers and the financial authorities to cancel Liiv M's designation as an innovative service. This has placed the financial authorities in a difficult position.
"We have separately hired staff that will be in charge of Liiv M services at branches," a KB Kookmin Bank official said.
"The reality is that boundaries between industries are being blurred and that banks need to find new sources of revenue, given new players in the financial services industry are right behind us," he said.
It is unclear whether Kookmin Bank will be able to achieve its goal, despite expanding its sales channels. An industry source said "The fact is that fewer and fewer people are visiting bank branches given the shift to mobile banking services."
Other lenders are monitoring the backlash Kookmin Bank has faced from employees as this case demonstrates conflicts that can develop when existing employees seek to protect their interests and counter new initiatives.
As banks face a tougher business environment in an era of low interest rates, they are seeking partnerships with entities from different industries. Financial firms have increasingly been collaborating with telecommunications businesses.
Hana Financial Group joined hands with SK Telecom, setting up financial services platform Finnq in 2016. The fintech firm offers loan comparison services, based on data from SK Telecom.
Woori Financial Group is reviewing establishing a similar joint company with telecommunications firm KT. The two formed an alliance on developing ICT-integrated financial services in July and drew up a related taskforce. Data analysis is a key area Woori and KT are set to work together.
