Raising Deposit Rates and Increasing Mid-Interest Loans... Savings Banks Accelerate Growth

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[Asia Economy Reporter Song Seung-seop] The savings bank industry is rapidly growing, driven by rising deposit interest rates and mid-interest loans. The industry's total assets have already surpassed 100 trillion won in the first half of this year. With efforts to diversify sales channels through non-face-to-face and mobile platforms, it is expected that the steep growth trend will continue for the time being.

According to the disclosure by the Korea Federation of Savings Banks on the 30th, the average interest rate for 12-month fixed deposits at savings banks (as of the 25th) reached 2.24% per annum. This is up to 1.74 percentage points higher than the deposit product rates offered by commercial banks. Compared to internet banks, it is also up to 0.74 percentage points higher.

Parking accounts, which pay interest even for short-term deposits, also offer relatively high interest rates. JT Savings Bank's 'JT Jump-up Savings Deposit' provides a base interest rate of 1.3% per annum (as of the 25th, variable rate). There are no additional preferential interest conditions such as deposit period or balance maintenance. SBI Savings Bank's mobile banking application, Cider Bank, offers an 'Deposit and Withdrawal Account' with an interest benefit of 1.2% per annum on amounts up to 200 million won without any conditions. The advantage is that interest is calculated from the 1st to the end of each month and paid monthly.

As demand for parking accounts increases, some existing products have been converted into parking accounts. OK Savings Bank has revamped its OK Daebak Account into the OK Parking Daebak Account, offering an interest rate of 1.7% per annum. All internet and mobile banking transfer fees are waived. Accounts can be opened non-face-to-face without visiting a branch.

In the credit sector, mid-interest loans targeting middle- and low-credit borrowers are being actively pursued. For savings banks subject to household debt volume regulations, mid-interest loans with relatively generous limits are advantageous for credit growth.

The balance of mid-interest personal credit loans in the savings bank industry exceeded 11 trillion won in the first half of this year, reaching 11.8047 trillion won. This is about 1.25 times (24.2%) higher compared to 9.5076 trillion won at the end of last year. The proportion of new loans with mid-interest rates of 16% or less has also increased accordingly.

The expansion of non-face-to-face sales channels through mobile platforms and active partnerships with fintech companies have had a significant impact. As customer choices broaden, the number of savings bank users is also increasing. Currently, the number of domestic savings bank users is estimated to be about 7 million as of the end of last year.

SBI Savings Bank has partnered with Naver Pay and electronic financial payment services to launch new services such as easy payments. It currently also provides partnership services with BigValue, Kakao Pay, Payco, Toss, and others. OK Savings Bank is reportedly developing business models using blockchain technology in collaboration with fintech startup Delio.

At the association level, preparations are underway to establish MyData (personal credit information management) participating institutions and joint authentication services. The Korea Federation of Savings Banks plans to promote business through partnerships with fintech companies and financial firms that have received MyData approval. Sixty-seven savings banks using the federation's network will be collectively linked as MyData participating institutions, establishing a business partnership base to expand the platform's service areas.

Furthermore, as non-face-to-face sales channels through mobile platforms and partnerships with fintech companies become more active, customer choices are expanding, leading to an increase in savings bank users. Currently, the number of customers using domestic savings banks is estimated to be about 7 million as of the end of last year.

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