Two consortiums, led by South Korean Internet giant Kakao and No. 2 telecom operator KT, were approved to launch the nation’s first Internet-only banks next year, the banking authority said Sunday.

Under the government’s pilot program, the two banks will offer financial services from deposits, lending and credit cards to foreign exchange transactions through their online platforms only -- the first of their kind in Korea’s 23 years of financial history.

Their operations are expected to start after they get the final approval within the first half of next year. The Financial Services Commission on Sunday requested they come up with stricter security measures. 

According to the agency, Kakao’s Kakao Bank gained high scores for innovative services based on its immensely popular mobile messenger app KakaoTalk with 40 million users.

KT’s K Bank was also praised for better customer access as it has teamed up with partners from diverse sectors such as telecommunications, payments and retail, it said.

Internet banks come as the government looks to open up its financial services sector recently. Internet companies are already jumping into the bandwagon amid the rapid infiltration of online banking and mobile payments here.

Due to stringent financial regulations, however, they are still required to partner with a licensed bank to launch their own Internet bank.

Kakao and KT are especially pinning high hopes on “middle-interest loans” that would appeal to small borrowers.

Currently, top-tier banks offer an annual rate of 3 percent to 5 percent, while the secondary financial institutions such as mutual savings banks or capital services firms charge whopping 15 percent to 34 percent interest rates. 

Internet banks say they can better evaluate the creditworthiness of borrowers based on the data they collect from hundreds of millions of mobile devices -- including location, the use of local services and e-commerce transitions.

Kakao Bank said it would bring Kakao’s traffic resources, big data on users and data analytics, while its bank partners KB Kookmin Bank and Korea Investment Holdings have knowledge of financial products.

The bank also aims to go global as it has secured ties with Tencent, China’s biggest social-networking and mobile games company, and the U.S. online retail giant eBay, which also owns Korea’s two leading shopping sites Gmarket and Auction.

“We will ramp up efforts to offer diverse and practical benefits for customers through Kakao Bank,” said Yoon Ho-young, Kakao’s senior vice president.

K Bank also showed confidence in building a more accurate credit rating system based on KT’s own delinquency customer list and the data collected from its card and bank partners, including Woori Bank, the nation’s second-largest lender in terms of assets.

“We will expand benefits for small borrowers and start-ups,” said Kim In-hoi, the bank task force leader. “We aim to become the No. 1 Internet bank by offering more convenient on- and off-line services.”

By Lee Ji-yoon (jylee@heraldcorp.com)