Internet banking, once considered groundbreaking for enabling account holders to access banking services remotely, is losing its shine as mobile banking gains in popularity. With mobile banking accounting for over 90 percent of non-face-to-face transactions, commercial banks are actively exploring options to scale down internet banking operations, which come with substantial operational costs.

As per multiple banking industry sources on Sunday, KB Kookmin bank, South Korea’s largest bank, recently discontinued the acceptance of new loan sign-ups via its web banking platform, which prompted customers to use the bank’s mobile app KB Star Banking or visit physical branches for loan applications.

Alongside the commercial bank, internet-only bank K-Bank made a significant change in March by discontinuing its web banking services for retail customers to make sure that its offerings are only available on its mobile platform. This shift encompasses not only loan services but also deposits, credit cards, and various other financial services, with K-Bank explaining that the decision was prompted by the growing user base primarily utilizing mobile banking. With K-Bank’s transition, all three internet banks, including Toss Bank and Kakao Bank, now offer their services solely through their respective app platforms.

Market insiders argued that complicated internet banking services, which often require multiple downloads of security software including Active X, contributed to the rise of more convenient mobile banking platforms. According to the data released by the Bank of Korea, mobile banking transactions at domestic banks surged to 19.1 million in the first half of 2023, marking a substantial 19.2 percent year-on-year increase. The total amount also saw an uptick of 2.4 percent to reach 14.7 trillion won. Mobile banking transactions constituted a significant 86.9 percent of the overall online transactions for both internet and mobile banking, to hit an all-time high. “From January to May this year, mobile banking accounted for a staggering 96.1 percent of non-face-to-face transactions,” according to an unnamed commercial bank official.

Online banking services have been losing ground in the banking industry because of its limited customer base and high operational costs. Annual operational costs, including labor costs, alone are estimated to run into the hundreds of millions of won. In response, more banks are putting most of their marketing resources into app services.

Some analysts argued that internet-only banks played a pivotal role in reshaping the landscape of online banking. These banks, introduced in 2017, sought a different approach by placing a strong emphasis on mobile apps. “Since 2019, there has been a consistent upward trend in the registration and usage of mobile banking services, and internet-specialized banks have significantly contributed to this expansion,” according to Lee Dong-gyu, the head of the payment stability team at BOK. According to data from the central bank, the growth rates of internet banks in terms of registered customers and the transactions volume as of the end of 2022 outpaced those at commercial banks, at 2.5 times and 2.7 times respectively, from 2019.

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