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   제목: Korean banks set for fiercer rivalry in Southeast Asia

Korean banks set for fiercer rivalry in Southeast Asia


October 28, 2020

By Park Jae-hyuk

The COVID-19 pandemic has caused major difficulties to the nation's four largest banking groups' foreign operations because overseas business trips and face-to-face transactions have been restricted throughout this year.

But at the same time, they have discovered new opportunities from this ongoing crisis through further expansions in the Southeast Asian market and efforts for digitization.

The executives directing Shinhan, KB, Hana and Woori financial groups' global businesses told The Korea Times their companies will continue to focus on Vietnam and Indonesia in 2021, implanting the global trend of contactless transactions there.

"We expect non-face-to-face transactions will become popular in the Southeast Asian financial market due to COVID-19," KB Chief Global Strategy Officer (CGSO) Cho Nam-hoon said. "Because of the deteriorating credibility of China, which is presumed to be the epicenter, the relocation of major production bases to Southeast Asia will likely be accelerated."

From that standpoint, KB secured a 67 percent stake in Indonesia's Bukopin Bank in September and acquired a 70 percent stake in Cambodia's Prasac Microfinance in April.

"We will continue to look for additional business opportunities in Vietnam," Cho said. "We also plan to enter the Southeast Asian financial hub of Singapore which has become more important since the Hong Kong protests."

KB has been regarded as the last-mover in the global business among the four banking groups, so its plans to expand in Southeast Asia can become threats to its biggest rival, Shinhan, which has grown into the leading foreign bank in Vietnam.

Shinhan's global business department head Jeong Ji-ho said his company will concentrate on supporting its Vietnamese and Cambodian subsidiaries next year.

"We will focus on discovering businesses optimal to each country again next year," he said.

In May, Shinhan signed a memorandum of understanding with Hana to cooperate in seeking business opportunities overseas and refrain from competing with each other. Their partnership will likely be more solid, given that Hana mentioned Indonesia and Myanmar as the foreign markets to focus on next year, instead of Vietnam and Cambodia.

"We will make efforts for further growth in the Myanmar market, where we hold the second rank in the microfinance business," Hana CGSO Lee Jong-soung said.

He added his company will also concentrate on the Indonesian market for the success of Line Bank, a digital bank that will be established there soon in collaboration with the mobile messenger service provider Line.

Although Hana took a step backward from the fierce competition in Vietnam, Woori has reinforced its operation in the Southeast Asian country.

"In our Vietnamese subsidiary, we upgraded the WON Banking app in March to enhance contactless sales, and at the same time we released mobile-only savings products there," Woori's global business division head Hwang Gyu-soon said.

In October, Woori injected 160 billion won ($134 million) into its Vietnamese subsidiary through the issuance of new shares, with the aim of becoming the country's leading foreign bank. Another 120 billion won was injected into its Cambodian subsidiary.

Digitization considered necessary

The four groups all agreed that greater digital capacity is necessary to survive the intensifying competition in the global market. Their efforts for digital transformation have been accelerated further due to the changes brought on by COVID-19.

"It is meaningless to try to catch up with local banks in terms of the number of branches, so the digital capacity is the make-or-break factor for our global business," Jeong said. "We will affiliate with local digital platform service providers to attract more customers."

KB mentioned the "digital-oriented penetration into the Southeast Asian market" as one of its key strategies for global expansion.

"Southeast Asian countries have sought to establish a cashless society and introduce e-KYC, which refers to contactless authentication, so the digital business model based on high supply of mobile devices can be an alternative to their low access to financial institutions," Cho said.

Hana is also betting on the growing supply of mobile devices and the introductions of technologies and systems enabling e-KYC in the Southeast Asian market. Lee said the Indonesian subsidiary's cooperation with Line is part of his company's efforts to become the leader in digital finance in Southeast Asia.

Woori completed renewals of the mobile banking system for its Vietnamese and Cambodian subsidiaries during the first half of this year, following the growing supply of smartphones in Southeast Asia and the local regulators' policy to boost digital finance.

"This has been done to brace for more contactless sales with the advent of the 'next normal' in the post-COVID-19 era," Hwang said.

The banking group also plans to create credit assessment systems customized for Indonesia and Cambodia during the latter half of this year as it did in Vietnam in July last year to satisfy the explosive financial demand in that country.


Excerpts articles from the Korea Times




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