South Korea’s first internet-only banking firm K bank officially launched its business Monday, vowing to offer higher interest rates for depositors and lower interest rates for marginalized borrowers, as the company saves costs from having no brick-and-mortar branches.

K bank’s services are available 24/7 on a smartphone app and on the internet. It offers five kinds of deposit products, three loans and two check cards.

One of its representative products include the Code K Regular Deposit which offers 2 percent annual yield, the highest level among the first-tier banking industry.

The Slim K Mid-rate Loan, targeting those with credit ratings of 4 to 6, offers a 4.19 percent to 9 percent interest rate depending on borrowers’ credit grade, which still makes it the lowest level among commercial lenders in the primary banking sector, with a maximum loan set at 30 million won. 

The smaller net interest margin compared to that of existing banks can be covered by the costs saved from not having bank tellers and bank branches, said K bank CEO Shim Sung-hoon.

“Our costs only include the leasing fee for an office building, wages for our employees and the cost to operate our servers. In price competitiveness, we are at a superior position than other banks that have 15,000-20,000 employees,” Shim said at a press conference in Seoul.

During the first 15 hours of opening the K bank app, the number of new depositors at K bank reached 15,317, exceeding the monthly average 12,000 accounts through online banking at other existing 16 banks between December, 2015 and December, 2016, K bank officials said.

The launch of K bank was originally scheduled for January, but the company delayed the launch to early April, as the user interface of various Android versions of K bank’s smartphone app required some fine-tuning.

K bank is a consortium formed by 21 stakeholders. Telco giant KT has 8 percent, and the remaining 20 firms include Woori Bank, NH Investment & Securities, GS Retail, Hanwha Life Insurance and Alipay, the Chinese payment platform affiliated with e-commerce giant Alibaba.

Lawmakers, heads of K bank stakeholder firms and officials at the financial authorities participated in the launch ceremony.

Yim Jong-yong, chairman of the Financial Services Commission, said K bank will bring more innovation and competition in finance, which will benefit the public and create quality jobs in the fintech sector.

“Please do not cease to differentiate yourself from existing financial companies,” Yim told K bank officials.

However, K bank’s opening was somewhat overshadowed by a pending bill that failed to pass the National Assembly due to the different views of lawmakers. The revision bill had sought to allow conglomerates to own a more than 10 percent stake in a bank, up to 34-50 percent.

KT needs a much higher cap than 10 percent to double K bank’s capital within two or three years to meet the BIS capital ratio, a global standard that gauges a bank’s core equity capital to its total risk-weighted assets, on the assumption that the bank keeps growing in terms of deposits and loans.

“If the bill fails to pass (the National Assembly), it will be difficult for all our stakeholders to raise their capital according to their stake ratios in reality. But I still have hope that we could raise capital by the end of this year or early next year,” Shim said.

Internet-only Kakao Bank, under Kakao Corp., the operator of the dominant chat app Kakao Talk, is expected to win a final regulatory approval soon and launch its services within the first half of the year, industry watchers said.

Shim said K bank and Kakao Bank will not be competitors but market pioneers, each separately looking for a niche market in finance.

By Kim Yoon-mi (yoonmi@heraldcorp.com)