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[New Paradigm] Secondary Financial Industry Develops New Source of Profit…Vigorously Chasing Mainstream Industry
18 February 2009
With the execution of the Capital Market Consolidation Act, savings banks and credit card companies that have been relatively weak in financial business now gain a new opportunity.
So far, savings banks don’t have a particular business model except profits from deposit. However, now they can supply capital and invest aggressively by selling funds, and card companies also can develop other source of profits in addition to card fees and installment financing.
To secure competitiveness in fund sales, savings banks are aggressively conducting education for fund managers.
Though the card companies are reluctant to disclose their specific strategies, they have adapted to the Capital Market Consolidation Act by preparing products such as a CMA-linked card.
  • Savings banks have high expectations for fund sales.
  • As early as H1 of this year, savings banks can sell funds at a teller’s counter like normal banks.
    Savings banks, whose profits are dominantly based on interest margins, have high expectations that fund sales represent a new opportunity.
    According to a savings bank official, "From now on, when fund sales and trust works are permitted, a stable growth is possible with diversified sources of profit focusing on large saving banks. However, it is important to differentiate ourselves from other commercial banks."
    Determining that to securing competent human resources is the first-priority sell funds efficiently; savings banks are making preparations accordingly.
    Sixty-six savings banks that are prepared to participate in fund sales have 1053 licensed fund managers; and they are working to expand that number of personnel.
    Korea Investment Mutual Saving Bank and Totamo Savings Bank have the most fund managers (115) followed by Jeil Mutual Savings Bank, which has 72 managers.
    Most savings banks educate their employees passionately. A prime example is Hyundai Swiss Savings Bank, which has encouraged employees to obtain Certified Financial Planner (CFP) certification and has educated 140 preliminary PBs.
    To prepare for the Capital Market Consolidation Act, the Korea Federation of Savings Banks has operated a Task Force (TF) for fund sales since last March, and reinforced its professional human resources for its fund managing department.
    In addition, the Federation had previously established a fund sales system including a program lease contract with Koscom.
  • Card companies, concentrate their efforts on the development of linked products.
  • Card companies don’t welcome the introduction of the Capital Market Consolidation Act because risk management has become more important due to the economic crisis. However, they have plans to reinforce additional services and develop linked products to adapt to coming changes.
    They determined that it is hard to expand business or launch new projects because the domestic card market is already saturated.
    First, Shinhan Card is providing benefits to prevent the loss of clients such as ‘Tops Club’, where clients can automatically become a VIP of the bank, card, securities, and life companies by becoming a VIP of any one of them (Shinhan Financial Group).
    Lotte Card issued ‘Tong Yang CMA Lotte Check Card', and developed products that provide additional services of Lotte Check Card when using Tong Yang CMA of Tong Yang Securities as a settlement account. Moreover, KEB Credit signed an MOU with Daishin Securities last year and is going to issue a CMA card.
    Card companies’ strategies include watching the current market situation, and concentrating on auto financing and real estate brokerage services when the Capital Market Consolidation Act is passed.
    Many card companies plan to secure clients in auto financing with 36-month installments and interest rates as low as 7%.
    Also, they will cooperate with real estate businesses that were previously excluded from the business of card companies due to the difficulty of card payment, so future brokerage fees are expected to be paid by card.
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