Financial consumers in South Korea are taking out deposits from the high-interest accounts with internet-only banks as they lose competitiveness on lower interest rates.

Korean app-based lender Kbank announced two interest rate cuts in June and reduced the annual rate for its Plus Box savings account to 2.45 percent from 2.6 percent.

Plus Box is a type of a parking account that allows consumers to make up to 300 million won ($232,279) in deposits. A deposit of 300 million won led to an annual interest of 6.6 million won in the past but with the rate cut, the amount stands at 6.2 million won.

Last week, another digital bank KakaoBank Corp. lowered the annual interest rate of its Safe Box savings account to 2.2 percent from 2.4 percent. The move followed its previous cut from 2.6 percent to 2.4 percent in April.

Another app-based Toss Bank has also been lowering the interest rate for its savings account.

Until early April, the bank offered the highest savings rates among internet-only banks, offering 2 percent per year for deposits below 50 million won and 3.8 percent per year for deposits exceeding 50 million won.

However, as of Tuesday, Toss Bank’s annual rate stands at 2 percent regardless of the deposit amount, which is the lowest among those offered by internet-only banks.

Toss Bank has lowered the interest rates four times in just two months.

The lenders say that the cuts come as they need to consider the balance between market interest rates and deposit amounts.

“It is not easy to offer high interest rates for accounts with easy withdrawals and deposits when market interest rates are low,” said an unnamed official from one of the online banks. “In fact, the current rates are significantly higher than the average interest rate offered by traditional banks, which stands at about 0.1 percent per year.”

The official noted that instead, they are trying to compensate customers with high-interest fixed-term deposits.

Some depositors that are unhappy with the lowered rates are turning to savings banks for short-term savings.

JT Chinae Savings Bank, Eugene Savings Bank, NH Savings Bank and OK Savings Bank offer savings accounts at an annual rate of more than 3 percent.

By Seo Jeong-won and Chang Iou-chung

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]