KEB Hana Bank’s Ji: “Globalisation and digitalisation strategies will be embedded in all our businesses”

• KEB Hana Bank sees GLN as a tool that will help them maintain their competitiveness
• Through the company’s 1Q Agile Lab programme, a good number of fintech companies get to receive investment support from the company
• The bank has the Vision 2540 that aims to raise its global earnings contribution to 40% by 2025

KEB Hana Bank aims to become a global digital bank.Fueled by a set of strategies, centred on the global loyalty network (GLN) service, the bank’s CEO Ji Sung Kyu shares how the company plans to grow further amid the fierce competition in the domestic Korean market.

GLN, a one-stop platform for all digital currencies, was launched to address the company’s need to go beyond the competition. With about 100 million clients at the moment, the bank looks at the service as something that can eventually stand on its own, and which can grow up to 300 million customers within one to three years. The company is planning to expand the service to countries like Vietnam, Thailand, Malaysia, Indonesia, China and Japan.

On the other hand, KEB Hana Bank, which takes pride in having a good relationship with its partners, continues to invest in fintech companies through its 1Q Agile Lab mentoring programme that supports promising startups. The bank is also looking into making a great investment through digital transformation to increase their foreign assets.

In this interview with The Asian Banker chairman Emmanuel Daniel, Ji further elaborates about the company’s GLN service, Vision 2540 and strategy to become a fully digital and global bank.

Emmanuel Daniel (ED): Many people outside of Korea don’t really know KEB Hana Bank’s DNA and its real core capability. The regulator has been pushing all the banks to be more international, so I’m quite interested to know about your strategy for this and the competition inside Korea. What is your overall strategy priority?

Ji Sung Kyu (JSK): We have two main strategies that we focus on. One, is globalisation, and the other one is digitalisation. As you’ve just mentioned, there is a fierce competition in the domestic Korean market, so there is a limitationas to how much we can grow further in the domestic market. That is why we try to take the strategy that integrates globalisation and digitalisation.

I attended a seminar called "Sleeping with the Enemy". Banks, basically, need to sleep with fintech. I heard a lot of stories. There is a series about ING Bank’ssuccessin Europe and a series about the success of the DBS Bank in Asia.

I also attended a training session. There was a question about why Korea has a very advanced internet network, but why is there no central bank that can present at this wonderful seminar? I personally received the same question from one of the attendees. I answered that maybe Korea has other internal issuesthat really put a drag on a Korean bank’s investment. I mentioned this because you might wonder why a Korean bank like Hana is not recognised as a global digitalised bank.

Maintaining the bank’s competitiveness through GLN

ED: Sometimes, we find that banks from some countries find it difficult to tell their stories outside the country. I'm very interested to hear your strategy.

JSK: I would like to take this opportunity to talk about the potential that we have with regards to our digital initiatives and globalisation strategy. We have the strength in GLN, which we have prepared for a long time and was recently launched.We made a partnership with Taishin International Bank in Taiwan, and we provide GLN services to Taiwanese and KEB Hana Bank customers. 

We have also planned to expand these services to broader countries like Vietnam, Thailand, Malaysia and Indonesia. We also have a plan tolaunch the GLN service in Japan and China. This network will grow bigger and bigger going forward. It’s kind of a banking network combined with a payment network and loyalty network.

ED: What is the origin of this programme? How does it fit into KEB Hana’s overall strategy? 

JSK: We need to go beyond the competition between banks to compete with fintech companies. GLN services can be a tool that will help us maintain our competitiveness. We try to expand this service globally.

We're developing a proprietary system that can support the service. The GLN service can grow bigger than even banking business. That is why we have this plan to make the GLN service as a standalone company. In that case, partners that participate in the origin network can be called shareholders of the company.

ED: How many members do you have, and what is your target in the short term? Say, your one-year or three-year target?

JSK: Currently, we have about 100 million clients. A hundred million members. It’s a loyalty network. We have a relationship with Taishin Bank in Taiwan, which has over 5 to 6 million clients, which easily became our clients. If we include Vietnam, Indonesia, Thailand, Japan and China, then it would be at least 300 million customers in one or three years.

ED: The fact that you already have 100 million potential users is very good. What is the volume of transactions you see right now?

JSK: The service is in its beginning stage. We launched the service in April this year, so the transaction volume is not that big at this moment. Maybe next year, we can give you a better figure.

ED: You have a loyalty and payment element. Is the latter already working?

JSK: We have the Tokyo Olympic next year. We expect a lot of global loyalty network clients to use our products and services at the event. Payment is working, and loyalty is already working between Korea (KEB Hana Bank) and Taiwan (Taishin International Bank).

ED: What is the revenue model and transaction fees for this programme? Are the transaction fees enough to cover your cost?

JSK: Foreign exchange fees and usage fees coming from the companies. They are enough to cover our cost. Cost is not that high right now because we use the existing loyalty network. We do not develop our network, so cost is not high at all. We are also utilising the loyalty programmes of other banks and other financial groups. We don’t develop all kinds of programmes. That means it doesn’t cost much.

ED: Where do you think this programme can take you? What is the next step? What are some of the long-term goals that you have for this programme?

JSK: The main purpose is to compete against other fintech companies. They will use all global payment system. If we don’t have our own, it will be very difficult to compete against them.

ED: This year, you joined Ethereum Consortium. How does that help with this programme? Is that related to each other? Because loyalty needs token. Have you also discussed this with Visa and Mastercard? What is their opinion?

JSK: The shared services have nothing to do with Ethereum at this moment, but we are preparing to launch a separate token, which may be called the Hana Money token. We are getting close attention from the CEO of Mastercard, while Visa wants to go separate.

Working with fintech companies

ED: Which fintech company do you work with shows a good example of your working relationship with fintech companies. And what kind of programmes you run to incorporate innovation into KEB Hana?

JSK: We can’t give you a list of fintech companies that we partner with because there are so many, but basically, we've partnered with Toss, Oracle, Line and Shinsegae Group (SSG).

ED: The regulation in Korea is too strict, so many of these fintech companies cannot operate until they find a partner with the banks. This partnership is very important. Do you have a programme of looking at new innovations, incorporating it into the bank, or buying fintech companies? Do you have a policy when you buy fintechs?

JSK: We already have a fintech company called Finnq with SK Telecom. We own 51% and SKTelecom owns 49%. It's a lifestyle platform that does banking business.We have continued to make investment in fintech companies, and we have the 1Q Agile Lab programme, which invites fintech companies, and these companies receive investment from our company.

We put great importance to our collaboration with fintech companies. A good example is our collaboration with Line, which is a project to launch an internet-only bank, and if that becomes successful, it will demonstrate the last collaboration case between banking and information and communications technology.

A look into the bank’s domestic and global strategies

ED: As you improve your digital strategy, what are some of the important data that you monitor about the bank's performance? A lot of the internet-only banks around the world right now, their biggest benefit is speed and cost of acquisition. Do you have an idea of your own speed of acquisition? Do you have a goal that you want to reach?

JSK: Domestically speaking, we are focusing on cost-cutting and customer acquisition. We intend to enlarge our customer base because we have a fewer number of customers than other peers, so our focus is more on cost-cutting.

But, globally, we are focused more on enlarging our customer base than cost cutting. Korea has a population of 50 million. Out of 50 million, we have 30 million that are banked, but if we expand overseas, we can expand our customer base from 50 million to 500 million.

ED:  In terms of employees, do you foresee that you might reduce employees? What about the composition of the employees? What sort of skills that you'll be looking for?

JSK: 13,000 employees will be reduced to around 6,500. Cut in half in 10 years. Right now, we are training our employees as one-stop bankers. We call it OSB, one-stop banker. We need an all-around player who can do everything with a mobile.

Clients will not come to the bank anymore in the future, so they will use mobile, and my staff will do all kinds of business, including deposit, loan, foreign exchange and consulting service on mobile.I have a plan to do personal reshuffling for all of our staff members. We try to shuffle all the customers and exchange customers from all different parts of our businesses.

ED: How agile is your new technology platform? Do you need to revamp your core banking system, for example?

JSK: We try to use an existing system, and we try to integrate digitalisation and our digital technology into our existing system. We try to automate many different functions, which means that we don’t need as many employees now.

ED: In terms of relationship with your regulator, what are some of the challenges that you have with the regulator today? How would you describe your relationship with them, and what needs to happen in regulation for you to achieve your goal?

JSK: We have engaged in numerous discussions with our financial authorities, and what we realised is that the financial authorities are becoming more flexible. Relatively, they are conservative with the big banks, but they try to deregulate for fintech companies, and that next step will be for big banks.

Raising the profits earned globally

ED: As you internationalise the business, are you thinking also to internationalise your asset book? I noticed that you have an asset mortgage programme for buying houses outside of Korea. You had real estate in Japan and the US as well as seminars on global real estate investment. 

JSK: We have a vision called the Vision 2540, meaning that we intend to replace the global earnings contributions from 12%, which is the current figure, to 40% by 2025. In order to realise this vision, we intend to increase our foreign assets by making a great investment. They will be drawn to our investment banking (IB)business, and we will use digital transformation as a tool to achieve this goal.

We are closely watching the situations overseas. In terms ofIB business, we are focused on syndicated loans involving foreign companies as well as infrastructure fund investment. The second goal that we are targeting is localisation. We intend to hire more local staff overseas, working at our overseas branches, and we try to train them, so they can become more global talents.

ED: What is KEB Hana's strategy in terms of wealth, high net worth and private banking?

JSK: We had a competitive edge in asset wealth management and private banking, but efforts are on the way to operate our wealth management business. Domestically speaking, we try to integrate globalisation and digitalisation strategy into our wealth management business.

ED: It's true that KEB Hana has a history in wealth management, but how is the competition in Korea now for wealth, cost of the business, products, and so on?

JSK: Competition is getting fiercer and fiercer. That is why we try to integrate our globalisation and digitalisation strategy to wealth management business. We think that it is a way to maintain our competitiveness. It’s part of the strategy that started three years ago. We established a joint venture with a management firm in China. We are also working closely with a Japanese asset management firm.

By making such efforts, we try to introduce the global asset management products to our customers. Basically, globalisation and digitalisation strategies will be embedded in all kinds of business that we do.