"Fierce Competition in Ultra-Low Interest Rates"... Savings Banks Attract Customers with Unique Products (Comprehensive)

Unique Products Attract Attention Amid Ultra-Low Interest Rates and Industry Competition
Used as a Means to Capture Customers Ahead of Open Banking

[Asia Economy Reporter Song Seung-seop] Amid the ultra-low interest rate environment, the savings bank industry is steadily introducing unique products. With the activation of non-face-to-face and digital finance making relational sales difficult, and the upcoming launch of open banking, the industry is engaging in unique product marketing to attract even one more customer.

According to the industry on the 23rd, JT Chin-Ae Savings Bank operates the ‘JT Jjeom People Plus Installment Savings’ account, which can be opened by presenting a photo taken with a pet dog. It offers an annual interest rate of 3.0% and features the pet dog's name recorded on the passbook. SBI Savings Bank also runs the ‘SBI Star Pet’ installment savings product, which provides up to a 0.9 percentage point preferential rate if it is confirmed through social networking services (SNS) that the customer owns a pet dog. Upon maturity, 1% of the interest is donated by SBI Savings Bank at its own expense to support pet protection.

Seram Savings Bank’s ‘My Design Savings’ allows customers to create their own product name. The preferential conditions include 11 categories such as the zodiac sign of the year, being over 60 years old, and parents with multiple children. For every 2 to 3 conditions met, the interest rate increases by 0.1 percentage points, up to a maximum of 0.5%.

There are also products that offer interest rate benefits linked to insurance products. DB Savings Bank’s ‘Dreambig Installment Savings’ raises the interest rate up to 6.9% if the customer subscribes to automobile insurance through its affiliates. Woori Financial Savings Bank’s ‘SamSamOoh Together Made Savings’ applies a 1.5 percentage point preferential rate if bancassurance is maintained for three months. Customers can deposit up to 500,000 KRW per month, and if five or more people join simultaneously, the interest rate can increase up to 4.1%.

Parking accounts that pay interest even if deposited for just one day were also unique products, but as the craze grew, various banks including the top five savings banks have been rushing to launch them. This month alone, Pepper Savings Bank and Sangsangin Savings Bank released parking accounts. Both products pay interest rates around 2% annually, similar to the savings bank’s announced installment savings rate (2.42%). In the case of Sangsangin Savings Bank, deposits of 50 billion KRW were gathered within just three days of launch.

Utilizing 'Unique Products' to Attract Customers Amid Low Interest Rates and Open Banking

Savings banks originally conducted relational sales by promoting high-interest accounts to customers visiting their local branches. However, as the low interest rate trend continues, the interest rates on savings bank deposits and installment savings have steadily declined. Moreover, with the expansion of digital finance demand, the number of branch visitors is also decreasing. According to the ‘2020 Second Half Financial Stability Report’ released by the Bank of Korea last December, non-face-to-face financial transactions have increased nearly fivefold since 2016.

Professor Sung Tae-yoon of Yonsei University’s Department of Economics explained, "The differentiation of special interest rate promotions, which the industry focused on, is no longer effective," adding, "Savings banks, which lack sales channels, inevitably need products specialized for consumers." He continued, "Competition within the industry is fierce, so for consumers...

There is also analysis that this is an attempt to secure customers ahead of the implementation of open banking. Open banking is a service that allows the use of all financial institutions’ accounts through a single application (app). It is scheduled to be implemented starting with the Korea Federation of Savings Banks as early as next month. The industry is currently known to be in the final stages of building the computer network.

Savings banks must catch up not only with competition within the industry but also with commercial banks that have already started open banking. Furthermore, they need to establish their position across the secondary financial sector, including securities firms and card companies. They need means to secure customers early in the open banking service.

Some have pointed out that there is little effect on operating profit. A representative of a savings bank that does not operate unique products said, "Unique products have the effect of raising brand awareness in the early stages of launch," but added, "It is difficult for them to account for a large portion of profits."

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