As competition between traditional powerhouses and latecomers in the retail sector of securities companies shows signs of overheating, financial authorities have begun monitoring the situation. While the strengthening of various benefits to attract customers is good for investors, excessive competition can lead to unnecessary sparring and reckless measures. The authorities view the free fee event by MERITZ Securities as the starting point of this overheating competition.
A senior official from the financial authorities noted to ChosunBiz, "We are closely watching the competitive situation among securities companies surrounding the stock brokerage market." This official stated, "Compared to the ETF battles of some asset management companies, it doesn't seem like securities firms are at a stage of concern, but we will continue to monitor as the intensity of competition is becoming stronger."
What ignited the retail competition between securities firms was the surge of foreign stock investment that hit the domestic stock market last year. As individual investors began investing in U.S. stocks, the revenues from the foreign securities custody service for securities firms rose sharply. According to the Korea Securities Depository, the amount of U.S. stocks traded by individual investors in 2024 was $509.9 billion (approximately 747 trillion won), reflecting an 87% increase compared to 2023.
As a result, not only traditional powerhouses in the retail field like MERITZ Securities, Samsung, and Kiwoom Securities, but also latecomers like Toss Securities and MERITZ Securities have aggressively sought to attract retail investors. In this process, Toss Securities, which emphasized an intuitive user interface, stood out by attracting a large number of new investors.
The rapid growth of latecomers has especially unsettled Kiwoom Securities among existing strong players. Kiwoom Securities is a securities firm where the retail division accounts for a large portion of its total revenue. According to the Korea Financial Investment Association, Kiwoom Securities' revenue from foreign securities custody fees last year increased by 95.6% from the previous year to 208.9 billion won. Toss Securities' revenue of 208 billion won brought it close to Kiwoom Securities. In terms of growth rate compared to the previous year, it surpassed Kiwoom Securities with a 211.8% increase.
Under these circumstances, even MERITZ Securities launched a completely free transaction and exchange fee event card on November 18 last year. This event provides investors with MERITZ Securities accounts exemptions from domestic and U.S. stock transaction fees and dollar exchange fees. Not only transaction and exchange fees, but also fees payable to relevant institutions such as the Korea Exchange and the Korea Securities Depository are covered by MERITZ Securities. This is the first time that a securities firm has covered the fees of relevant institutions.
The financial authorities view MERITZ Securities' extraordinary event as having officially ignited fierce competition among securities firms. A senior official from the financial authorities stated, "If one securities firm offers to pay even the fees of relevant institutions, it's difficult for competitors to stay idle" and added, "If larger firms take advantage of their financial power to indiscriminately launch events, it could eliminate smaller firms from the market."
The war for money has already intensified, and noise is also emerging. Kiwoom Securities introduced a new membership program this January that rewards customers who meet the minimum trading amount for overseas stocks with cash rewards ranging from 10,000 won to 500,000 won. The requirements were significantly lowered, allowing anyone to participate solely based on the amount of overseas stock contracts without any additional conditions. Kiwoom Securities has reportedly allocated a budget of 200 billion won solely for rewards this year.
The problem is that with the introduction of this membership, there has been a surge in the influx of cherry pickers, or opportunistic consumers, seeking rewards. Following criticisms that it encourages wash trading and inflated trading volumes, Kiwoom Securities stated that it would exclude certain stocks, often mentioned as primary targets of cherry pickers, from the performance recognition criteria on the 27th of this month.
At the Kiwoom Securities regular shareholders' meeting held on the 26th, CEO Eom Joo-seong likened Toss Securities' online community service to a leading room, sparking controversy. Following Eom's remarks, Toss Securities reportedly pondered internally on how to respond but ultimately decided not to react.
A representative from the financial authorities stated, "While the competition among financial investment companies can help reduce costs for investors, (the authorities) cannot intervene recklessly" and noted, "We will thoroughly supervise to maintain a healthy and fair competitive environment."