KB Bank withdraws from 4th Internet-specialized bank amid profitability concerns

The challenge of the 4th Internet-specialized bank (4th INB) is being abandoned by more banks. DOUZONE has announced its withdrawal from the 4th INB, confirming Shinhan Bank's absence, and KB Kookmin Bank has also concluded that it will not participate. A Kookmin Bank official noted, 'We internally reviewed the investment in the 4th INB consortium but ultimately confirmed that we would not participate.'

The atmosphere is quite different from the last three approval rounds. Although the competition among consortia to capture the 'investment' bank was fierce, banks were also probing discreetly for participation in the consortia mentioned as strong candidates, engaging in a game of vigilance with rival banks. As of now, the only entities that have confirmed their participation in the 4th INB consortium are Woori Bank and NH NongHyup Bank. These two banks have committed to joining the small business bank consortium led by Korea Credit Data (KCD).

The reason banks are not as proactive in investing in the 4th INB is that they have determined that 'the practical benefit is minimal.' Concerns have been raised about the profitability of internet banks due to stringent approval criteria from financial authorities, tightened regulations on loans to medium- and low-credit borrowers, and limitations stemming from being a special bank for small and medium-sized enterprises and small businesses, leading to a decreased investment attractiveness. An official from a bank mentioned, 'It is questionable whether we can achieve the expected growth and profitability while faithfully implementing the funding for small and medium-sized enterprises and small businesses, which the financial authorities are placing emphasis on,' adding, 'It is inevitably a business model that makes it difficult to manage soundness, such as arrears.'

The participation of banks in the consortium to invest equity in the INB is not solely for the purpose of generating revenue as financial investors (FIs). It is also not aimed at exercising voting rights as shareholders. The primary goal for banks is to secure a differentiated alternative credit evaluation model by utilizing the information accumulated by the fintech companies participating in the INB consortium. A key theme that the consortia challenging the 4th INB are promoting is 'the provision of funding to small and medium-sized enterprises and small businesses,' which aims to enhance capabilities in this area.

However, utilizing alternative information is not something that can only be achieved by investing in the INB. Banks are actively exploring ways to leverage non-financial information for loan assessments through business partnerships. A representative example of this is 'Naver Face Core.' Naver Face Core is a personal credit evaluation model developed jointly by Naver Pay and NICE Information Service, characterized by utilizing non-financial data such as online payment history and shopping details. It has been reported that Shinhan Bank and NongHyup Bank are currently reviewing whether to apply it. The day before, DOUZONE also announced that it would withdraw its application plan for the 4th INB approval and said, 'We have decided to shift our strategy towards combining new financial platforms.'

Due to banks' sluggish investments and the impact of an unstable political situation, the success of the 4th INB cannot be guaranteed. Following DOUZONE, Ubank also announced it would postpone its preliminary application, leaving only one strong candidate remaining: the small business bank consortium. The financial authorities have stated that they plan to begin the approval process as scheduled, starting with the reception of preliminary applications on the 25th and 26th.