The upcoming launches of the nation’s first two Internet-only banks is likely to put pressure on the overall banking industry to minimize branch numbers and payrolls for better profitability, analysts said Monday.

In addition, they said, major first-tier banks will have no choice but to diversify their financial products as the competition in an already saturated market intensifies.

Kakao Corp. and KT Corp. have won preliminary licenses to run Internet-only banks, triggering memories of the remarkable success an online-oriented securities firm has had in the stock brokerage industry.

Internet-based Kiwoom Securities, which has a workforce of under 500, saw its operating profit (100.2 billion won, or $86.5 million) approach that of NH Investment & Securities (125.4 billion won) ― formerly an affiliate of Woori Bank ― which had a payroll of about 2,700 workers last year.

The 46-year-old NH Investment is considered among Korea’s top three brokerages, alongside the state-controlled KDB Daewoo Securities and Samsung Securities, which is backed by Korea’s biggest conglomerate.

But the big three have yet to check Kiwoom’s No. 1 market share in terms of trading volume. Kiwoom held about 16 percent of the local securities market as of September 2015, topping the list for the 10th consecutive year.

Kiwoom has only one offline branch nationwide, which is its headquarters in Seoul’s financial district of Yeouido, though it has the largest number of individual customers. It made inroads into the market in 2000 with its promotion of an Internet-based brokerage house that charges the lowest fees on buy and sell orders via the online-based home trading system.

Kiwoom’s aggressive attraction of small investors was a great threat to offline competitors. Some of them were forced to close as they neglected the establishment of home trading systems at that time or stuck to service charge-based businesses.

The situation, on the other hand, has let the securities sector evolve rapidly through restructuring and diversification of products, involving financial derivatives and overseas investments.

Research analysts are divided over Internet banks’ potential impact on traditional banks including KB Kookmin, Woori, Shinhan and KEB Hana.

“Their debut could deal a blow to major commercial banks for a certain period,” said KTB Investment & Securities analyst Kim Hyung-min.

But he predicted that the regulatory authority’s approval of their license on Sunday would be a cornerstone for the long-term development of the nation’s banking sector. He expected synergy between the Internet banks and financial technology, pushed by the major first-tier banks.

Ultimately, the introduction of Internet banks does not mean aggravating the competition in the saturated market but generating innovative services by promoting consolidation of finance and IT, officials at the Financial Services Commission said.

“Local banks will no longer stick to high service fee-based operations in the coming years. Their asset management and investment banking segments are expected to be bolstered,” said a Financial Supervisory Service official.

By Kim Yon-se (kys@heraldcorp.com)