Will KB be 1st bank to advance into other industries?

Financial authorities are set to decide on Thursday whether to grant formal approval to KB Kookmin Bank’s mobile phone services, despite opposition from local carriers. If approved, this would be the first instance of a bank being allowed to expand into other industries.

The Financial Services Commission (FSC) will hold a committee meeting on Thursday to discuss the approval of Livv M, a mobile virtual network operator (MVNO) offered by KB Kookmin Bank, according to sources.

Under the country’s Banking Act, financial companies are not allowed to own non-financial subsidiaries. However, in 2019, the service was recognized as an “innovative financial service” and guaranteed exception from regulations for a maximum of four years. April 16 is the closing date of the demonstration.

Market watchers are anticipating approval.

The service has received positive market evaluation due to its competitive pricing, made possible because the MVNO does not have to manage a communication network as local carriers do. Additionally, the bank offers cheaper calling plans to customers who have an account with the company. Over the past three years, the service has attracted more than 410,000 customers.

Financial authorities’ recent move to ease the long-standing separation between industrial and financial capital is seen as another reason for the expected approval. On Jan. 31, the FSC pledged to relax regulations and introduce specific measures in the first half of this year to promote further growth in the industry.

“The FSC is reviewing ways to promote innovation in the financial

industry by exploring options to expand the sector’s advancement into non-financial areas,” said Shin Jin-chang, director of the financial industry at the FSC, during a seminar held at the National Assembly on Monday.

However, the service has faced strong opposition from local carriers. On Tuesday, the Korea Mobile Distributors Association (KMDA) released a statement, expressing concerns about the possible negative impact.

“If an MVNO service is designated as a subsidiary of a bank, more banks may enter the mobile communication market, which could harm small and mid-sized retail distributors,” the association wrote.

Already, commercial banks such as Hana and Shinhan Bank have entered the market indirectly, through cooperation with mobile service operators such as KT.

The association also stated that it would cease opposition if authorities imposed further regulation to prevent market disruption. It requested authorities to prevent banks from launching calling plans with unprecedentedly low prices and keep their market share below 50 percent.

“We are making our best efforts to get approval as we always do. We will shape out more detailed plans after we receive results tomorrow,” said an official from the KB Kookmin Bank, when asked about their plans for the service.