[1mm Finance Talk] Why Are Banks Entering the MVNO Business?

KB Kookmin and Woori Bank Enter the Budget Phone Market
NH Nonghyup and Hana Bank Launch Plans Through Partnerships With MVNO Operators
Recognized as a "Cost-Effective Business" for Data Utilization and Securing Loyal Customers

Recently, banks have been entering the budget phone (MVNO) market both directly and indirectly, drawing attention to the reasons behind this move. Until now, KB Kookmin Bank was the only bank to launch a budget phone business, but this year, Woori Bank entered the market, followed by NH Nonghyup Bank and Hana Bank, which have also entered the budget phone business indirectly through partnerships with MVNO operators. Analysts explain that this is a strategy to transform into a lifestyle platform that goes beyond finance, by using the highly integrated “telecommunications” service as a key customer touchpoint.

According to the financial industry on August 8, Hana Bank recently partnered with the MVNO operator Free Telecom to launch a budget phone plan. To coincide with the launch, Hana Bank is also running a promotion offering a monthly discount of 3,000 KRW on phone bills for up to 12 months when customers set up automatic payments from a Hana Bank account.

KB Kookmin Bank was the first in the banking sector to launch a budget phone business. In April 2019, KB Kookmin Bank was designated by the Financial Services Commission as the “first innovative financial service in the banking sector,” and in December of that year, it launched the first MVNO brand in the financial industry, “KB Liiv Mobile.” According to KB Kookmin Bank, as of the end of June, the number of “KB Liiv Mobile” subscribers reached 437,000.

Following this, in April this year, Woori Bank launched “Woori WON Mobile,” marking its entry into the budget phone market. “Woori WON Mobile” can be activated 100% online through the “Woori WON Banking” app and its dedicated website. It also became the first in the industry to allow minors under the age of 18 to self-activate their service, emphasizing convenience. As a result, the number of subscribers surpassed 20,000 within just over two months of launch. A Woori Bank representative explained, “The majority of ‘Woori WON Mobile’ subscribers are in their 20s to 40s,” and noted that the bank is rapidly expanding its customer base.

NH Nonghyup Bank also partnered with the MVNO operator “Free Telecom” in June and launched a budget phone plan through its mobile app “NH All One Bank.” The easy payment platform Toss also launched “Toss Mobile” in 2023.

Despite the fact that the budget phone business does not significantly contribute to profitability, analysts say that banks are rushing into the market as an “entry strategy” to attract new customers. Telecommunications is a service deeply embedded in customers’ daily lives, and by integrating finance and telecommunications, banks can increase customer touchpoints and enhance their data competitiveness.

A financial industry official stated, “About 70% of customers joining through budget phone services are young people. For newcomers to society with limited financial history, telecommunications data can be used to design customized financial products and to enhance credit evaluation, making data utilization virtually limitless.”

The ability to secure loyal customers is also cited as an advantage. When banks encourage automatic payments from their own accounts, it helps prevent customer churn. Additionally, as banks must compete with big tech companies such as Kakao and Toss, they can expect to gain a first-mover advantage by expanding into a platform that covers all aspects of daily life, beyond just finance, by leveraging lifestyle-integrated services like telecommunications.

A banking industry representative said, “There is a growing sentiment that banks should no longer rely solely on interest margins and must seek new sources of revenue. In particular, since budget phone operators lease networks, banks can attract telecommunications customers as bank customers without large-scale infrastructure investments or marketing costs, making it a highly cost-effective business.”

This content was produced with the assistance of AI translation services.