In south Korea, internet-only banks, providing banking services and products to customer through online platforms and mobile apps without traditional physical branches, launched their business in 2017 and have gained popularity in recent years due to their convenience, accessibility, and of then better financial offerings. However, there is still limited research looking at the impact on the financial performance of traditional commercial banks in South Korea. To demonstrate it, this study investigated the multifaceted impact of internet-only banks on traditional banks listed in KRX examining key performance indicators such as profitability, banking growth, customer satisfaction levels, and stock performance between before (Q1/2013-Q2/2017) and after (3Q/2017-4Q/2022) internet-only banks. The data of this study were collected from four commercial banks listed in financial supervisory service of Korea. Wilcoxon signed ranks test were applied to validate on the significant differences of the financial performance.
This study discovered that the entry of internet-only banks had mixed effects on the financial performance and stock performance of traditional commercial banks in South Korea. The profitability of traditional commercial banks, measured by return on assets (ROA) and return on equity (ROE), exhibited improvements following the entry of Internet-only banks. However, net internet margin (NIM) showed a significant decrease over the same period. While there was an increase in deposit growth rate (DGR), Loan growth rate (LGR) remained unaffected by the entry of internet-only banks. Customer satisfaction levels, as indicated by the national customer satisfaction index (NCSI), increased after the implementation of internet-only banks. Despite there was a significant decrease in the short term (2016-2018), the stock return of traditional commercial banks did not exhibit significant differences before and after the entry of internet-only banks.