SEOUL -- Toss, a fintech unicorn which benchmarked European digital challenger banks to open a new internet-only bank, extracted positive assessment for its innovative idea, but it failed to secure preliminary approval from financial regulators after South Korea's leading financial group, Shinhan, withdrew as a key partner.
Toss was not selected because evaluators raised questions about its ability to finance and make a continued investment, Financial Services Commission (FSC) Chairman Choi Jong-ku said on Sunday. The second consortium led by Kiwoom Securities, an online brokerage service company, which partnered with Hana Financial and SK Telecom, also failed to win preliminary approval.
Choi expressed embarrassment at negative recommendations from a seven-member independent evaluation committee. "I've never expected it. I was quite embarrassed to hear the results," he said, adding Kiwoom's consortium also failed to satisfy evaluators in terms of "innovation and feasibility."
Viva Republica, the operator of Toss, had to form a new consortium after Shinhan and Hyundai Insurance quit in a dispute over an open banking system, which emphasizes inclusiveness and easy access. Toss wanted an innovative start-up system like a digital challenger bank.
"Although we have failed to realize our dream of establishing a new bank, we will maintain our dream of financial innovation without wavering," Viva Republica said in a statement. It did not say whether it would apply again. The FSC will accept new applications sometime during the third quarter of this year.
"Innovation is essential in evaluating Internet banks. However, the impact on the stability of our financial system cannot but be viewed as an equally important criterion, given that banks play a key role in our financial system," Yoon Chang-ho, director of the FSC's financial industry bureau, said, urging candidates for new inter-only banks to meet requirements that enable not only innovation but also stable management.
There are two internet-only banks, K bank and Kakao Bank, which have gained popularity by providing diversified loan services and easy lending to young smartphone users. They have forced commercial banks to renovate their online and mobile banking services.
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