[비즈한국] The U-Bank consortium, in which Hyundai Marine & Fire Insurance001450 is participating, announced that it is reconsidering its application for a preliminary license for an internet-only bank. Whenever financial authorities have announced schedules for internet-only bank licensing in the past, the financial sector’s attention has often turned to Hyundai Marine & Fire Insurance. The insurer has attempted to enter the internet-only banking market several times over the past few years, only to fail each time. However, with U-Bank announcing its decision to reconsider, Hyundai Marine & Fire Insurance's entry into the market faces further delay.
On the 17th, U-Bank announced it would reconsider its plan to apply for an internet-only bank preliminary license. The U-Bank consortium includes Lendit, Lunit328130, Javis & Villains, Travel Wallet, Hyundai Marine & Fire Insurance, Hyundai Department Store069960, SK Telecom017670, and Naver Cloud. Kim Sung-jun, CEO of Lendit, stated, “Given the rapidly changing social and political environment, the consortium held internal discussions promptly.” He added, “It was a difficult decision, but the participants quickly reached a consensus that from a strategic perspective, it is best to proceed in a more stable environment.”
U-Bank emphasized that it is not giving up on the internet-only bank project. CEO Kim Sung-jun added, “This announcement is one of the steps toward establishing an internet-only bank, not a withdrawal,” noting that “the timing of the application will be decided after sufficient consultation with financial authorities in the future.”
With U-Bank reconsidering its application, the timing of Hyundai Marine & Fire Insurance's entry into the internet-only banking space has also been pushed back. Hyundai Marine has been active in pursuing internet-only banking for a long time. In 2000, it pushed for the establishment of an internet-only bank with Daewoo Securities, but the plan was aborted due to uncertainties in the business environment, such as Daewoo Securities being acquired by KDB Korea Development Bank. At that time, there was also a lack of legal framework for establishing such banks.
In 2015, Hyundai Marine participated in the ‘iBank’ consortium with Interpark and others to enter the internet-only banking market but lost out to K-Bank and Kakao Bank. In 2019, it considered participating in the ‘Toss Bank’ consortium led by Viva Republica but ultimately withdrew due to disagreements during the shareholder structuring process.
Hyundai Marine’s participation in the U-Bank consortium drew particular attention. At its center is Jung Kyung-sun, Executive Vice President of Hyundai Marine & Fire Insurance and eldest son of Chairman Jung Mong-yoon. Before joining the company, Executive VP Jung was primarily active in social enterprises before taking office as Hyundai Marine’s Chief Sustainability Officer (CSO) in January of last year. He oversees the insurer's Planning & Management Division, Technical Support Division, and Brand Strategy Headquarters, and discovering new businesses is also one of his key roles. It is known that Executive VP Jung played a significant role in this internet-only bank project.
Executive VP Jung founded the social enterprise Root Impact in 2012 and established HGI (HG Initiative), a venture capital firm that primarily invests in social enterprises, in 2014. Because of his background primarily in the social enterprise sector, he has yet to demonstrate significant management capabilities within a large corporation. If Hyundai Marine successfully enters the internet-only banking market through U-Bank, it could serve as a moment for Executive VP Jung to gain recognition. However, with U-Bank reconsidering its application, any evaluation of his leadership has also been put on hold.
Executive VP Jung is also in charge of digital-related tasks in addition to the internet-only bank project. Hyundai Marine is expanding its digital business by integrating artificial intelligence (AI) into insurance. A prime example is the “AI Voice Guidance System” introduced on the 5th for car accident claim processing, which notifies customers of estimated insurance payouts, repair costs, and accident results. However, experts suggest this is not enough to judge Executive VP Jung’s management ability, as these services do not generate profit on their own like an internet-only bank.
Some argue that for Executive VP Jung to be recognized for his achievements, he must ultimately succeed in the internet-only bank venture. A financial sector official noted, “The internet-only bank has been one of Hyundai Marine's long-cherished projects, but they have been unable to enter for one reason or another. If they succeed, it would be a very encouraging development within the company.”
Internally, there is an expectation within U-Bank that financial authorities will allow for continuous licensing of internet-only banks. If continuous licensing becomes possible, U-Bank could potentially apply for a preliminary license in the second half of this year. In fact, U-Bank stated, “We have reached an agreement to pursue the preliminary license application again in the second half of this year, when it is expected that much of the current uncertainty will be resolved.” Hyundai Marine also maintains that it will continue its relationship with U-Bank. A Hyundai Marine official stated, “The U-Bank consortium remains intact.”
Financial authorities have also hinted in the past that they could allow for continuous licensing. The Financial Services Commission (FSC) stated in July 2023, “We will transform the banking industry, which currently has an oligopolistic structure, into a competitive market where new entrants can enter at any time,” adding, “Previously, new license reviews were conducted after the financial authorities announced licensing plans, but in the future, we will grant new licenses through strict evaluations of business operators that have sufficient soundness and business plans.”
However, even if U-Bank receives a license from financial authorities in the second half of this year, it will face tough competition. Three internet-only banks—K-Bank, Kakao Bank, and Toss Bank—are already active in the market. Financial authorities are scheduled to process the 4th internet-only bank preliminary license on March 25-26. U-Bank, as a latecomer, would have to compete with four existing players.
The U-Bank consortium will need significant capital to compete. The Korea Institute of Finance stated in a report, “Kakao Bank and Toss Bank, which achieved economies of scale early through steady capital expansion, saw their operating profit-to-expense ratios (a ratio obtained by dividing selling, general, and administrative expenses—including labor, IT, and rent costs—by operating profit) drop quickly, while K-Bank, which failed to do so, maintained an operating profit-to-expense ratio above 100% for a considerable period.” The report explained, “This shows that for an internet-only bank to generate stable profits, it must realize economies of scale early, which must be supported by timely capital expansion.” The operating profit-to-expense ratio is an indicator of a financial firm's sales and management expenses relative to its operating profit.
U-Bank may also face a situation where additional funding is required. In this case, Hyundai Marine, as a major shareholder, might be forced to provide capital support to U-Bank. As of the end of last year, Hyundai Marine’s Solvency Ratio (RBC) was 155.8%. The solvency ratio is an indicator of an insurance company's ability to pay out insurance claims on time. Financial authorities recommend that insurance companies maintain a ratio of 150% or higher. Hyundai Marine is barely meeting the regulator’s recommended level. In such a situation, large-scale funding for U-Bank could be a significant burden. Park Hye-jin, a researcher at Daishin Securities, noted, “As Hyundai Marine's solvency ratio has fallen below 160%, they were unable to pay dividends in 2024, and dividend visibility for 2025 also remains distant.”