[THE INVESTOR] While the successful launch of internet-only banks in Korea has put pressure on traditional lenders to modernize their services, the chief technology officer of Kakao Bank thinks they need “to keep IT in-house to achieve innovation.”
“Shifting the strategies from core-banking and business centric to tech-centric services is the key to success,” Kakao Bank CTO Guedon Jung said during Inside Fintech Conference & Expo in Seoul on Dec. 1.
Kakao Bank, led by the operator of Korea’s dominant messaging app KakaoTalk, has attracted some 4.35 million accounts in four months by offering expanded interest benefits and user-friendly mobile services. On the other hand, conventional banks opened only around 155,000 digital accounts last year.
Jung expects the banking industry to undergo the biggest-ever changes in the next 10 years, but most of Korean lenders rely on outsourcing for their technology development, letting themselves lag behind.
“While brick-and-motor branches, where a teller meets customers, have been playing an important role for traditional banks, a user-friendly mobile application and those who develop the program have become the core for Kakao Bank,” he said.
In his eyes, mobile applications developed by Korean banks look like miscellaneous stores where they just moved content from their PC version sites. “There are no true mobile apps by conventional banks,” Jung said.
“It was incredibly difficult to innovate the banking legacy. We decided to ditch PC banking to go mobile only despite concerns and doubts why we have to give up a big channel still used by many people.”
To enhance user convenience and redesign the banking system for mobile phones, Kakao Bank dropped as many unnecessary steps as it could, including passwords for bankbook, authentication systems requiring a public key certificate or Active-X tools. It also abolished prime rates for preferred customers.
Despite Kakao Bank’s popularity that challenges others, some concerns have been raised about how much longer it can offer interest benefits which led the company to report a cumulative net loss of 66.8 billion won (US$61.40 million) as of end-September. Its security loopholes recently found by incidents related to its debit card and oversea transactions have also worried customers.
“It’s a very fast growing bank, so the role of top managers is to know how to take risks at every growing stage,” Jung said.
By Park Han-na (firstname.lastname@example.org)