Korea’s New Challenge to the Internet-only Banking System

Korea’s New Challenge to the Internet-only Banking System

Internet-only banks mean banks which have no branches at all. These internet-only banks have some obvious advantages, such as no branch maintenance, fewer personnel costs, no paper, and no time and place limitations. Eventually, the Financial Services Commission which is a bank supervisory committee in Korea has announced the introduction plan for the internet-only banking system in Korea on June 19, 2015. According to the FSC’s plan, the FSC takes a two-track approach for internet-only banks at this time: (i) pilot operation of one or two internet-only banks under the current Banking Act of Korea, and (ii) additional licenses for more diverse companies after a revision to the Banking Act of Korea. Since internet-only banks are broadly one of commercial banks under the Banking Act of Korea, the same standards for commercial banks should be also basically applied to internet-only banks. However, some exceptions and different regulations should be necessary in order to achieve the purposes of introducing internet-only banking system in Korea. In particular, even though the FSC intends to offer internet-only banks almost all the services that general banks provide from deposits and lending to foreign exchange through Web and mobile platforms, it seems to be desirable that the scope of business for internet-only banks is limited to certain businesses for their IT related and specific purposes.