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Brunch, voluntourism and webisode. There is one common thing among these words. They are newly listed compound words in the Oxford English dictionary as the need for explaining them has arisen. Banks are no exception.
Fintech, the compound word of finance and technology, has become a common way of payment in many developed countries such as the UK and US. People want faster, lighter and more convenient method to pay for anything.
They don't want to waste time waiting for a cashier to calculate their change, nor fill their wallets with ‘heavy' coins. Simply put, they feel inconvenient to have their wallets in their back pockets. As the word Fintech itself is the integration of two different words, banks have no choice but to ‘integrate' to survive in this new and fierce market.
In the internet bank market, which is most likely to be a battlefield for banks to maintain their presence in transition to Fintech, they alone cannot stand as main actors. This is because banks cannot be the largest stakeholders of any internet bank in Korea due to the strict government regulation. So it is the best choice to take some of pie by integrating forces with partners.
So, they first need to find partners who are able to provide them more advanced technology, more stable platform or more data than the banks already have. To acquire competitive edges in the internet bank, some banks are already in progress.
Woori bank, for example, has formed an alliance with KT which is one of three oligopoly telecommunication companies in Korea. What Woori can do for this alliance is that it has experimented in this field with its own program – Wibi bank, the mobile version of the internet bank it created. So it has an infrastructure. And in exchange, KT is able to provide a wider range of customer big data. When these two create a synergy together, they can prosper taking advantage of each's strong point. Kookmin bank has also taken a step in the internet bank. It has cooperated with Korea investment holdings and Kakao group. It is very clever to join with Kakao since payment application called Kakao bank run by Kakao group has already attracted many customers by interlocking the system with Kakao talk.
Because it is not an overstatement to say that almost all Koreans having a smart phone has Kakao talk in their phones, it can provide a lot of customer data. In this alliance, the synergy by integrating Kakao's customer pool with mobile banking customers of Kookmin is expected.
In addition, highly advanced technology or customer data are not the sole factor which decides the winner in the internet bank. Banks need to integrate the technology or customer pool with its fine marketing. People seem to be attracted by banks' marketing strategies even though it doesn't bring any practical benefits. That is why Woori bank's Kakao wallet bankbook has succeeded with its cute features of Kakao characters.
Currently, banks have a variety of financial products that they provide to their customers. Benefits of each product differ and that differentiation is made by banks, not by customers. Fintech which doesn't require customers to have physical payment methods – card, bankbook and even mobile application – will force banks to discard their traditional power to constitute benefits.
They should integrate benefits in one, Fintech payment method. In that way, customers have their own choice to select benefits so that they use it to maximize their good. The one thing banks have to try best, except letting customers have the choice of selecting benefits, is to retain as many affiliates as possible.
The more affiliates they have, the more various classes of customers they attract. Let's say that a bank focuses on affiliating with big markets. Then it is most likely to attract ladies who are the main customers going to grocery shopping. On the other hand, a bank affiliated with convenient stores will be more favored by young and single people who live alone and want quick purchases and consumption. The example of integrating benefits in one Fintech method is Samsung pay. It is getting popular with its integrated form of benefits and convenience. And it is also not burdensome for sellers since it can be paid if the phone with Samsung pay touched with an ordinary card reader.
It can be said that all major banks in Korea are on the same start line when it comes to Fintech. And those who move first will win the victory in the Fintech market, which will decide the success and failure of them in the coming era.
To be the winner, they should find and cooperate with proper partners. And they need to integrate their benefits in one mobile method. Who will survive depends on who integrates first and how well they integrate.
Kim Hyeong-in studies political science and diplomacy at Ewha Womans' University.
