Digital Banks - South Korea

South Korea

In South Korea, the Digital Banks market market is expected to witness a significant growth in terms of Net Interest Income.
By 2024, the projected Net Interest Income is estimated to reach US$33.72bn.
This indicates a positive trend for the market segment.
Furthermore, it is anticipated that the Net Interest Income will continue to grow at a Compound Annual Growth Rate (CAGR) of 15.39% from 2024 to 2028.
By the end of 2028, the market volume is projected to reach US$59.78bn.
When compared globally, it is worth noting that in China is expected to generate the highest Net Interest Income in the Digital Banks market market.
In 2024, the estimated Net Interest Income in China alone is forecasted to be US$969,200.0m.
This showcases the dominance of the United States in this market segment.
South Korea's digital banking market is experiencing rapid growth, with emerging players like Kakao Bank and K Bank gaining popularity among tech-savvy consumers.

Key regions: United Kingdom, Japan, China, United States, Brazil

Definition:

Digital Banks refer to the emerging market for purely digital banks that offer financial services via online and mobile platforms. Unlike traditional banks, digital banks also known as neobanks, do not have store-based branches and instead rely on technology to deliver their services. But in contrast to digital-only direct banks, which focus on providing traditional banking services in an online format, the digital banks/neobanks covered in this analysis prioritize cutting-edge features and a modern user experience.
Digital Banks offer a wide range of financial products and services, including savings and checking accounts, credit cards, personal loans, and investment products, among others. They aim to provide a more convenient, accessible, and user-friendly banking experience by leveraging technology such as mobile apps and artificial intelligence. They also provide a digital identification and onboarding process, often via smartphone.
The Digital Banks market is growing rapidly as consumers increasingly demand more convenient, digitally focused financial services. Neobanks/Digital Banks are able to offer these services at a lower cost compared to traditional banks, as they have lower overhead costs and a more efficient operating model.
However, digital banks face challenges in building trust and establishing their reputation in the financial services industry. They must also navigate the complex regulatory landscape and comply with the same rules and standards as traditional banks.
Overall, the Digital Banks market represents a growing and exciting opportunity for financial services providers to deliver innovative and convenient solutions to consumers.

Structure:

The market data comprises Net Interest Income, the value of Deposits, the value of Loans, Credit Card Interest Income as well as the number of ATMs.

Additional information:

The Banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. Banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. Additionally, changes in regulations and the growing trend toward digitalization are shaping the retail and commercial banking market, creating opportunities for new entrants and forcing existing players to adapt.

Key players in this market are companies such as Bunq, Tomorrow, and Revolut.

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Analyst Opinion

Amidst the rapid digital transformation in South Korea, the Digital Banks market is experiencing significant growth and evolution.

Customer preferences: South Korean customers are increasingly drawn to the convenience and efficiency offered by digital banks, opting for seamless online and mobile banking experiences. The younger demographic, in particular, is inclined towards tech-savvy solutions that align with their digital lifestyles.

Trends in the market: One prominent trend in the South Korean Digital Banks market is the fierce competition among both traditional banks transitioning to digital platforms and new, specialized digital-only banks. This competition is driving innovation in services and features, ultimately benefiting consumers with a wider range of choices and enhanced digital banking experiences. Moreover, partnerships between digital banks and popular e-commerce platforms are on the rise, further expanding the reach of these digital banking services.

Local special circumstances: South Korea's tech-savvy population and advanced digital infrastructure create a fertile ground for the rapid growth of digital banks. The country's high smartphone penetration rate and the government's initiatives to promote fintech innovation contribute to the favorable environment for digital banking services to thrive. Additionally, the strong emphasis on security and privacy in South Korea aligns well with the secure nature of digital banking, further boosting its adoption among the population.

Underlying macroeconomic factors: The robust economic landscape of South Korea, coupled with the increasing trend of cashless transactions, propels the growth of the Digital Banks market. As the country continues to embrace digitalization across various sectors, the financial industry is witnessing a shift towards digital banking as a preferred choice for many consumers. Furthermore, the regulatory environment in South Korea is becoming more conducive to fintech companies, fostering a supportive ecosystem for the expansion of digital banks in the market.

Methodology

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on Net Interest Income, Bank Account Penetration rate, the value of Deposits, the number of depositors, the value of Loans, the number of borrowers, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Modeling approach / Market size:

Market sizes are determined by a combined Top-Down and Bottom-Up approach, based on a specific rationale for each market segment. As a basis for evaluating markets, we use data provided by the IMF, World Bank and the annual reports of the top 1000 Banks by asset size. Next we use relevant key market indicators and data from country-specific associations such as GDP, deposit interest rates, lending interest rates or bank account penetration rates. This data helps us to estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. For example, the S-curve function and exponential trend smoothing are well suited to forecast financial services for digital as well as traditional products and services.

Additional Notes:

The market is updated twice per year in case market dynamics change.