[1mm Financial Talk] Inbaeng Increases Deposit Customers with Interest Coupons and Cash Payments...

Internet banks are experimenting with various approaches in their deposit products. They are pursuing both fun and benefits simultaneously through strategies such as coupon events offering interest rate benefits, cash or cashback rewards for deposit and withdrawal transactions, and prize payments upon mission success, aiming to capture idle funds circulating in the market.

According to the financial sector on the 12th, KakaoBank revised the special terms for seven deposit products (Safe Box, Piggy Bank, Record Passbook, Fixed Deposit, Flexible Installment Savings, 26-Week Installment Savings, One-Month Installment Savings) in August and implemented the revised terms on September 10. Specifically, they introduced an interest rate coupon clause. An interest rate coupon is a coupon that provides additional interest benefits on top of the basic interest rate of deposit products and is given through events. To celebrate its 5th anniversary in 2022, KakaoBank held the ‘Everyone’s Surprise’ event, where customers solved simple quizzes and received interest rate coupons of up to 8% per annum applicable to the 26-Week Installment Savings. At the end of August, KakaoBank randomly awarded interest rate coupons by lottery to Safe Box holders. These coupons apply an interest rate preferential treatment of 0.5% or 1%. KakaoBank stated, “This surprise event was prepared to provide additional interest benefits to customers using the Safe Box,” and announced plans to hold interest rate coupon events for other deposit products as well.

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In the case of K Bank, benefits related to deposit and withdrawal accounts have been increased. On the 9th, they launched Deposit and Withdrawal Account 3.0, which provides a reward card containing immediate cash or check card cashback coupons every time a deposit or withdrawal transaction is made. The card includes cashback coupons of up to 1,000 KRW in cash or up to 10,000 KRW. K Bank explained that the fun element was added by requiring the reward card to be opened by the day after receiving it to obtain the benefits. Reward cards are given for transactions including deposits and withdrawals, automatic transfer withdrawals, and Parking Account Plus Box additions. Depending on the type of transaction, up to five reward cards are provided per day, and up to 152 reward cards can be received in a month.

Toss Bank launched the Challenge Account in May. Customers who practice Miracle Morning (waking up early for self-development) every morning are entered into a lottery to receive prize money. After opening the account, customers deposit a 10,000 KRW challenge deposit, and those who successfully check in during their set time (6 to 9 a.m.) on five weekdays have a chance to receive prize money calculated by multiplying the total challenge deposits collected from participants by a 2% bonus rate. If 100,000 people participate, the prize money awarded to winners before tax is 273,972 KRW. Since the challenge is weekly, collecting five lucky numbers received upon weekday morning attendance allows participants to enter a lottery drawing every Saturday, where winners are selected like a lotto. The Challenge Account surpassed 300,000 users within a month of its launch, with nearly half of them aged 50 or older.

The reason internet banks are increasing such fun and benefits in deposit products is analyzed to be an effort to capture idle funds looking for new investment destinations. The deposit products where benefits have mainly been increased are demand deposit accounts. Compared to fixed deposits and installment savings, these have lower interest rates and are classified as low-cost deposits. When low-cost deposits increase, banks can raise funds at a lower cost. From the bank’s perspective, even for a short period, raising funds at a low interest rate of 0.1% to 0.3% annually is a way to increase profits. In fact, as of October, expectations of a base rate cut have increased the number of customers holding onto investment funds without spending them, which in turn has increased idle funds. As of August, the demand deposits and MMDA of the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) were 617.2323 trillion KRW and 109.1944 trillion KRW respectively, increasing by 6.1508 trillion KRW and 1.1985 trillion KRW compared to July.

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