"Banks Getting Harder to Operate... Need to Introduce 'Gongdongjeompo' to Reduce Costs"

Korea Institute of Finance Report... "Introduction of Joint Branches Contributes to Increased Inefficiency and Customer Convenience"

[Asia Economy Reporter Haeyoung Kwon] Amid expectations of worsening management conditions for domestic banks this year due to interest rate declines, loan regulations, and economic slowdown, a proposal has emerged to introduce 'joint bank branches' in the mid to long term.

On the 8th, the Korea Institute of Finance stated in its report "Management Environment and Key Tasks of the Banking Industry in 2020" that "management conditions will deteriorate this year due to shrinking net interest margins, slowing growth of loan assets, and rising compliance costs," and emphasized that "the revenue structure must be improved and inefficiencies reduced."

As major alternatives, it suggested the introduction of bank agencies, joint bank branches, and shared branch usage. Lee Daegi, Senior Research Fellow at the Korea Institute of Finance, said, "With the future expansion of open banking application scope, customers will be able to use products and services of other banks not only online but also offline at a single bank," adding, "Considering this, the introduction of joint bank branches is expected to contribute to reducing bank inefficiencies and increasing customer convenience."

Furthermore, it was pointed out that accelerating digital adoption is necessary due to reductions in workforce and branch demand.

It also emphasized the need to improve the revenue structure focusing on profit growth rather than asset growth amid regulatory environment and worsening economic conditions.

The proportion of non-interest income in total profits of domestic banks is only 12%. This is because operations have been centered on asset growth, and due to the exclusivity principle, banks have found it difficult to develop other revenue sources beyond interest income. The social notion that 'services are free' has also made it difficult to discover alternative revenue sources.

Senior Research Fellow Lee Daegi stressed, "A sales-centered business culture based on consumer protection should be established to expand fee income," and added, "It is also necessary to pursue profitability-enhancing management strategies that acquire non-interest income by providing qualitative improvement services such as cross-selling, cash management, and asset management."

This content was produced with the assistance of AI translation services.