South Korea’s major banks are stepping up competition in the group savings account market, challenging online-only banks that have long dominated the space. These accounts, commonly used to manage shared funds within groups, offer banks an opportunity to attract loyal customers and bolster dwindling deposit balances. However, analysts say internet banks’ community-based features give them a competitive edge that traditional lenders may struggle to overcome.
Shinhan Bank launched its “SOL Group Account” service on Feb. 11, featuring actor Cha Eun-woo in its first ad campaign. While Shinhan previously introduced a similar service in 2011, it was discontinued in 2022 due to low usage. The bank revived the service after three years, adding features such as the option to transfer idle funds into high-yield accounts for additional interest.
Other major banks, including Woori Bank, KB Kookmin Bank, Hana Bank, and NH Nonghyup Bank, also offer group savings accounts. KB Kookmin Bank enhanced its service in the second half of 2024 by introducing a high-yield account with an annual interest rate in the 2% range and integrating group account functions into existing accounts. Woori Bank’s service allows for leadership changes within a group while retaining transaction history and issuing multiple linked cards.
Group accounts have gained popularity, particularly among people in their 20s and 30s. The trend took off after KakaoBank introduced its service in 2018, which quickly became a market leader. As of the end of 2024, KakaoBank’s group account balances exceeded 8.4 trillion won ($6.3 billion), with 11.3 million users. Its success is largely attributed to seamless integration with KakaoTalk, allowing users to join, invite others, and track transactions even without having a KakaoBank account.
Funds in group accounts don’t generate interest expenses, making them a cost-effective deposit source for banks, similar to low-yield demand deposits. These accounts, mostly structured as freely withdrawable deposit accounts, provide banks with a cost-effective way to secure deposits while also attracting new customers and increasing customer retention.
This is why all three of South Korea’s internet-only banks—KakaoBank, Toss Bank, and K Bank—have been offering group savings accounts. However, with declining demand deposit balances due to increased investments in U.S. stocks and cryptocurrencies, as well as low interest rates, traditional banks have intensified their competition to secure deposit customers, including those receiving salaries and pensions. This renewed push has brought group accounts back into focus for commercial banks.
Despite this growing interest, it remains uncertain whether traditional banks can replicate the success of internet banks. Unlike online lenders, most commercial banks require all group members to be existing customers to use the service. In contrast, internet banks leverage community-based platforms such as messaging apps to provide seamless access and management.
“The market is already well established by internet banks, so traditional banks are introducing various incentives to compete,” an internet banking industry official said. “However, they face challenges such as lower interest rates compared to internet banks and transfer limits for new accounts. Overcoming these barriers will be the key to their success.”
