Alibaba's payment service provider Alipay is collaborating to establish an online bank in South Korea.
Alibaba is growing its business outside People’s Republic of China and entering into the South Korean market, after the financial regulatory body of South Korea has given a preliminary endorsement to two organizations supported by the online trading giant’s affiliate and Kakao Corporation to establish the country’s first online electronic bank.
Kakao, which is known for running the country’s most famous chat service, is a member of consortium of 11 collaborators including divisions of eBay and Tencent that was approved by the Financial Services Commission on Sunday. Alibaba news affirmed that another consortium of 21 collaborators, led by telecommunication service provider KT Corp with the Hangzhou based enterprise’s payment platform, Alipay, also attained approval to set up an online banking institution.
Stock in KT increased by 2.2% as of 10:40 p.m. ET (0340 GMT), whereas Kakao was able to gain by 11% before cutting gains on Monday. Alibaba news today affirmed that the Kakao backed consortium, in which Loen Entertainment, Kookmin Bank and Korean Investment & Securities are also collaborators, aims to make an investment worth $259,72 million (300 billion won) in the banking institution, with an additional investment worth 400 billion won to be made in 2018, the regulatory body stated.
The consortium aims to initiate operations at the earliest by 2015 after final endorsements given in early 2016. KT’s consortium, whose collaborators also encompass Hyundai Securities and Woori Bank, aims to make an investment worth 250 billion won in the banking institution, the regulatory body stated.
In an attempt to boost growth in its financial sector, China is letting non-financial organizations open banks but does not let industrial giants, such as Hyundai Motor and Samsung, participate in it. Alibaba Breaking news reported that Kakao’s group encompasses 10% stake owned by Kookmin Bank and 50% stock owned by Korean Investment Holdings company, the regulators stated.
The endorsements will be finalized after the National Assembly ratifies legislation permitting Web-only banking institutions to operate, stated the country’s Financial Supervisory Service and Financial Services Commission. It initiates a significant transformation in the country’s financial sector. The regime’s decision to authorize the two consortium for the new industry played a role in triggering mixed responses from traditional financial corporations depending upon whether they were a part of the new sector or not.
FSC’s Banking and Insurance Bureau’s director general, Doh Kyu-sang, stated "(The introduction of Internet banks) will encourage local banks to improve their customer services and stir up a new round of competition in the industry." Online banks would be governed in a different manner.
"It will likely cost about 100 billion won (US$86.5 billion) to set up the network". If ratified, the financial regulatory body would endorse more information technology enterprises to introduce internet-banking institutions.
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