gettyimagesbank

Financial authorities are accelerating the process for the country's fourth internet-only bank license, planning to announce the specific conditions for the new bank later this month and hold an information session for prospective applicants within the year, according to officials, Monday.

Considering the process followed during the launch of previous internet-only banks, it is expected that preliminary approval will be announced in the first half of next year, with the official launch anticipated the year after.

Kim Byoung-hwan, chief of the Financial Services Commission, the country's financial regulator, also said at the National Assembly audit session last month, "We will expedite the preparation process for the licensing of the fourth internet-only bank."

Kim Byoung-hwan, chief of the Financial Services Commission, speaks during a National Assembly audit session in Seoul, Oct. 10. Yonhap

Currently, there are five consortia participating in the establishment of the new internet-only bank — Douzone Bank, U-Bank, Soso Bank, Korea Soho Bank and AMZ Bank.

Most of these consortia aim to differentiate themselves from the existing three players — KakaoBank, Kbank and Toss Bank — by offering specialized services targeted at small- and medium-sized enterprises (SMEs) and small business owners.

They expressed their commitment to becoming stable financial institutions that provide reliable funding to these sectors, which are key pillars of the domestic economy. They emphasize that many SMEs and small business owners have struggled to secure adequate funding due to the conservative approach of traditional banks.

Financial authorities, which have been strengthening support for these sectors under the themes of "coexistence" and "inclusiveness," also recognize the need for such specialized banks.

"Financial support for SMEs and small business owners has traditionally been centered around the Industrial Bank of Korea (IBK)," an official from an existing internet-bank said. "The establishment of specialized banks that can compete with IBK would contribute to the development of the corporate finance ecosystem."

However, a key challenge remains as contenders should ensure a strong capital base to ensure stable bank operations.

Some consortia are aware of this and have sought to secure partners to join their efforts. Nevertheless, it is widely believed this is still insufficient, as many of the consortia include entities that are essentially startups, raising concerns that major shareholders may struggle to contribute effectively to capital fundraising.

Additionally, since these banks will need to supply funds to SMEs and small business owners who have been overlooked by traditional banks, developing a more advanced or differentiated credit evaluation model is another crucial task. This is essential as it directly impacts the assessment of borrowers' repayment ability in the future.

Some market watchers cautiously predicted that Kbank's recent withdrawal from its second initial public offering push could become a variable in the licensing process for the fourth internet-only bank.

The failure of Kbank's second attempt at going public has been attributed to issues such as an overvaluation controversy as well as heavy reliance on Upbit, the country's largest cryptocurrency exchange.

"As a result, financial authorities are expected to adopt stricter criteria regarding the business models and financial strength of applicants for the fourth internet-only bank," one financial industry official said.