Banks are getting into the mobile phone business to harvest more data from customers and keep customers on their apps.
They enter telecommunications as mobile virtual network operators (MVNOs), which lease capacity from carriers and offer discounted telecommunications services.
Both traditional banks and internet-only banks are getting in the game.
“The data we can get as a financial company and the data we can get by offering telecom services are different,” said KB Kookmin Bank spokesman Hur Woong. “KB aims to deliver more sophisticated financial products based on collected mobile usage data.”
Viva Republica, the internet-only operator of Toss Bank, announced on July 21 that it had signed an agreement to acquire Merchant Korea, an MVNO, for 300 billion won ($230 million).
KB Kookmin Bank launched Liiv M with LG U+ in 2019. It is also working with KT and plans to work with SK Telecom later this year. KB Kookmin Bank borrows the networks of the three largest telephone companies to offer affordable mobile phone plans to customers. Shinhan Bank markets phone plans on its banking application.
The number of MVNO service users exceeded 10 million in 2021, according to the Ministry of Science and ICT, and there are about 70 local MVNO providers.
KB appeals to users by offering discounts on mobile phone plans to customers who sign up for their financial products, including savings accounts, in a bid to lock customers into its app.
Shinhan Bank began working with KT in July to introduce low-cost phone plans sold by KT’s MVNO partners on Shinhan’s online app.
Banks are required to obtain regulatory approval from the Financial Services Commission in order to operate non-banking services. KB Kookmin Bank received permission to operate an MVNO in 2019.
According to ConsumerInsight, teens through their thirties accounted for 35% of all MVNO users in the second half of 2017. The percentage increased to 46% in the second half of 2020.
CrePass, a credit-scoring startup, uses data, including mobile data, to score the credit of light filers, who lack a sufficient financial history. Woori Bank also offers loans to light filers based on their telecom usage.
“There are people who don’t have sufficient financial records, such as housewives and students,” said Bae Hyun-il, a spokesperson for Woori Financial Group. “There are no standards to assess their credit rating. But by assessing the timely payment of telecom charges, we can build alternative credit rating models. Although the market is not large, this could be a chance for the bank to find potential customers.”
Viva Republica said it acquired Merchant Korea, an MVNO, as it sees the market as very promising and profitable.
“We acquired the company because we believe the industry itself will grow,” said Kim Jin-ho, a spokesperson for Viva Republica. “The three major telecom companies – SK Telecom, KT, LG U+ – hold around 50% of the MVNO market but are unable to actively expand service due to regulatory discussions. This means opportunities for small and medium enterprises. .”
“Small and medium sized MVNOs have not been able to grow due to lack of branding, customer management and accessibility. We believe Toss would be able to solve this problem.”
Merchant Korea uses the networks of the three major telecommunications companies and has around 100,000 users.
Viva Republica’s acquisition of an MVNO “should generate synergy effects with its financial products,” said Lee Kyung-eun, an analyst at KB Securities. “By combining financial and telecommunications services and offering customer discounts, it will be able to attract more customers and increase its competitiveness by building customer loyalty to its application.”
BY JIN MIN-JI [[email protected]]