Koreans still rely on legacy banks as primary source of financial services, but fintechs gain ground

By Jun Ji-hye

Jang, a 28-year-old employee at an IT company in Seongnam, Gyeonggi Province, uses Woori Bank, one of Korea's major commercial banks, as her primary financial institution.

Since her salary is deposited into this account each month, routine living expenses such as rent, insurance premiums and other regular payments are automatically withdrawn from it.

However, Jang also uses KakaoBank, the country’s largest internet-only bank, for daily expenses like lunch, coffee and shopping. She has set up an automatic transfer from her Woori Bank account to the KakaoBank account each month for these expenses.

“Since my salary is deposited into Woori Bank, I essentially had no choice in selecting my primary financial institution,” she said. “I also use KakaoBank because of its many conveniences, such as the ability to handle most tasks via mobile.”

As Jang’s case shows, while the majority of people still use commercial banks as their primary financial service providers, the traditional concept of having only one primary financial institution is gradually changing, especially among younger people, due to the development of digital platforms, according to Consumer Insight, a local market research firm.

According to a report released Sunday by the researcher, based on a survey of 10,917 financial consumers nationwide, 80.7 percent of respondents selected a legacy bank as their primary financial institution.

Fintech companies, such as internet banks, ranked second with 9.8 percent, while securities firms came in third with 4.4 percent.

The proportion of consumers using a bank as their primary financial institution increased with age — 72.7 percent for those in their 20s, 78.8 percent for those in their 30s, 81.5 percent for those in their 40s, 83.4 percent for those in their 50s and 85 percent for those in their 60s.

On the other hand, fintech usage was higher among younger age groups.

The rate of fintech usage as a primary financial institution for those in their 20s was 17.5 percent, much higher than in other age groups, where the figures remained in the single digits.

The reason consumers cited for primarily using traditional banks points to habit, with key reasons being “long-term relationship,” “income deposit” and “management of living expenses.”

On the other hand, the main reasons cited for using internet banks as a primary financial institution include “convenience of transactions” and “unique products and services.”

The report was released as commercial banks are intensifying efforts to attract younger customers, believing this demographic is key to establishing long-term customer loyalty.

“The primary reason for using fintech firms as a main financial institution is the convenience of transactions, which differentiates them from traditional financial institutions,” a Consumer Insight official said. “The ease of mobile financial transactions is expected to be a key factor in choosing a primary financial institution in the future.”