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By Park Hyong-ki
Stringent regulations have been the biggest roadblock to launching an internet bank for Naver and other notable tech companies here, according to industry sources familiar with the situation.
As a result, Naver has now officially announced it will not be interested in offering such a service, adding it will not attend a seminar hosted by the Financial Services Commission (FSC) on the latest regulatory changes for internet banking.
NHN Entertainment and Interpark have also said no thanks.
This will put the brakes on the FSC, which was hoping to spur financial technology following the relaxation of rules governing nonfinancial and tech companies' bank ownership.
Industry sources say Naver, the biggest search portal, was never interested in becoming "the third bank," following in the footsteps of K bank, the first internet-only bank, and Kakao Bank.
"Why be the third and face the same regulations as the other two banks, while it has a higher chance of becoming the top abroad backed by the popularity of its Line messenger?" an industry source said.
Besides, Naver is already on the radar of the Fair Trade Commission and the Korea Communications Commission.
Industry sources say they doubt it wants to run an internet bank and have the FSC on its back as well.
"This is the same for other tech companies such as NHN and Interpark," said another industry source.
Naver has Line based in Japan, which launched Line Financial in November 2018 on the back of its success, especially in Southeast Asia.
Line messenger is dubbed one of the "Three Kingdoms" along with Facebook's WhatsApp and Tencent's WeChat, referring to the Chinese classic novel "Romance of the Three Kingdoms," according to the sources.
Line is widely used in Southeast Asia, especially Indonesia. WhatsApp is popular in the United States and Europe, and WeChat is most used in China.
Line Financial is preparing to launch an internet bank with partners including Mizuho Bank and Kasikornbank in Japan, Thailand and Taiwan among other countries.
In those markets, Line will be able to form the banks as the biggest shareholder, unlike here where it would likely be "scrutinized" to see whether Naver is "fit" to be a major shareholder of an internet bank, analysts say.
"Naver will not be able to see any merits here, when weighing its options, and comparing the local and overseas regulatory environments," said an analyst, who asked not to be named.
Its domestic interest only extends to maintaining its portal's 70 percent market share, and finding new growth in other technology areas overseas such as artificial intelligence, the sources said.
Even if Naver launched the third bank, its business model would not be entirely different from other internet and conventional banks such as Shinhan and KB Kookmin.
"They all have mobile banking platforms," said one of the industry sources.
"Naver's internet bank business model would have been the same as the rest, doing the business of deposits and loans."
By nature, finance is a heavily regulated industry in any country.
But here, it has so many layers of rules on top of rules, and specific rules that hinder creative business development, the industry sources added.
Fees charged on transactions are also regulated, instead of being set by market principles.
Under the circumstances, Naver will not be able to come up with a "unique internet bank model" that can stand out in the crowd, such as 7-Eleven's Seven Bank in Japan, the sources noted.
Seven Bank's ATMs inside the convenience stores, enabling customers without accounts to wire and withdraw money, set it apart from other conventional banks.
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