Banks engaged in fierce marketing competition in the retirement pension acquisition war at the end of last year. With the expected stagnation of growth in the banking sector due to the reduction of the base interest rate this year, there are not many non-interest revenue sources available to serve as new prospects. In particular, the recent possibility of 'switching retirement pensions' has prompted banks to make concerted efforts to prevent the outflow of retirement pensions to securities firms.
The most noticeable marketing effort is 'celebrity marketing.' Banks have employed famous celebrities like singer IU and An Yujin as brand models. The expectation was that retirement pensions, which were seen as difficult, could be made more accessible through familiar celebrities.
In addition, the launch of new brands, events, and the introduction of new services were highly competitive. Hana Bank plans to introduce the pension payment brand 'Hana the Next IRP' this month, the first of its kind in the financial sector. This service is designed to manage goals for retirement funds and pension operation strategies professionally in advance. Shinhan Bank has introduced the 'simplified IRP account opening service,' while KB Kookmin Bank has held events that include fee exemptions, additional bonuses, and interest rate benefits.
These movements in the banking sector are related to the retirement pension transfer service implemented in October of last year. Securities firms launched aggressive marketing campaigns to expand their territory in the retirement pension market. Even Mirae Asset Securities and Korea Investment & Securities undertook organizational restructuring, establishing new departments while expanding existing ones in the pension business sector.
As of the end of the third quarter of last year, the market share of retirement pensions by sector was highest for banks, holding 210 trillion won (52.6%). Next were securities with 96.5 trillion won (24.1%) and insurance with 93.3 trillion won (23.3%). While banks still hold the largest market share, the ability to switch sectors has intensified competition.
The results were not bad. In the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup), a total of 95.4 billion won in retirement pensions flowed in through transfers in the month following the introduction of the retirement pension transfer system on Oct. 31 of last year. While there were outflows to other financial institutions in defined contribution (DC) and individual retirement pensions (IRP), banks recorded a net gain overall as they focused on defined benefit (DB) operations.
Many analysts suggest that this competition is largely influenced by the slowdown in non-interest revenue among banks. Given the reduction in the Bank of Korea's base interest rate, growth in interest earnings is difficult to anticipate. With no distinct non-interest revenue to compensate for the decline in interest earnings, banks are inevitably facing a situation of stunted growth.
It is not new for banks to strive to reduce their reliance on interest earnings by increasing non-interest revenue. In recent years, they have aggressively invested in equity-linked securities (ELS) as a new source of non-interest revenue. However, sales of ELS were halted due to an incomplete sales issue at the beginning of this year, limiting growth in sales commissions and consequently in non-interest revenue. Banks have also come to feel, 'Ah, ELS won't work either; we can only rely on retirement pensions.'
A representative from a major commercial bank noted, 'Isn't it true that there is virtually nothing that banks can generate non-interest revenue from?' He added, 'These days, when you get a retirement pension from a bank, they present you with a generous gift like toothpaste, indicating how much they're betting their lives on the retirement pension market.' It will be interesting to see the performance of banks, which recorded 'record-breaking results' last year, this year.