JB Finance, a regional bank in Korea laboring under the shadow of the country’s big-four institutions, is using open banking and fintech partnerships to breathe new life into its franchise.
In some markets, being the fifth-largest banking group would be enviable, but in Korea, it means being an also-ran. JB Finance, headquartered in Jeonju, has under 3% of total market share. The industry is dominated by giants such as Hana Financial, Kookmin Financial, Nonghyup Financial, Shinhan Financial and Woori Bank.
Moreover, JB Finance is based in Jeonju, far from the bright lights of Seoul, so it lacks cache with upper and middle class consumers.
With net interest margins falling and fintechs preying on the weakest institutions, JB Finance felt itself under terrible pressure, says Jin Kyoungnam, manager of the group digital strategy department.
The bank restructured last year, separating chairmen for its holding company and for its largest constituent, regional player Kwangjiu Bank, a move designed to let JB Financial focus on digitalization. Part of that effort involved recruiting Jin, who returned to Korea from London, where he had worked on digital transformation at HSBC.
JB Finance had two valuable assets: customer data, and a banking license (in 2016, Kakao Bank, an all-digital challenger, received a license). The management realized it could charge fintechs a fee to get access to its data and piggyback on its license.
Although Kakao has been a huge success in Korea, winning 1.5 million customers in its opening week in 2016, no financial group made the plunge. (Kakao this year added mortgages to its business of consumer lending.) JB’s management decided the biggest banks wouldn’t risk cannibalizing their business, but that JB could. (But see our story about KB Kookmin's digital marketing success in credit cards.)
They have the brand that we don't have
This year the bank launched its digital service, branded oBank (for open banking). It relies on JB’s license, but uses the trendy name to attract people who would otherwise scoff at dealing with a rural, regional institution.
The stratagem has won at least one big retailer, Shinsegae, the department store franchise, is now using oBank for payments and rewards services.
“They have the brand that we don’t have,” Jin told DigFin, speaking on the sidelines at a recent Money 20/20 event. “We provide the UX [user experience] on a white-label basis.”
The new front
oBank is also moving into remittances and loans for foreigners working in Korea, starting with a deal with Cambodia Bank. The bank is looking for similar tie-ups throughout Southeast Asia. Jin declined to provide specifics around oBank’s revenues or volumes; he says it is hard to define the size of oBank’s business in part because it continues to rely on JB Financial resources in areas such as I.T. and operations.
There won't be a price war for overseas markets
Overseas business is likely to become a fiercely competitive arena for digital banking, as it does not represent a threat to bigger institutions’ Korean business, but Jin says oBank has spent a lot of time building relationships. “There won’t be a price war for overseas markets,” he said.
oBank’s growing relationships with merchants and domestic peer-to-peer online networks is enabling JB Financial to attract customers that the traditional bank could never win, Jin says. Citing a deal with a domestic P2P network he declined to name, he says 95% of the customers it has introduced are new.
“People see a fintech name like oBank, and it’s popular,” Jin said. “Now we can start to cross-sell other products.”