South Korea’s Shinhan Financial Group has decided to withdraw from a Viva Republica-led consortium to create a virtual bank, raising doubts about its partner’s fund-raising capacity and dealing a blow to the authority’s hope to add a third internet-only bank.

According to financial industry sources on Thursday, Shinhan Financial Group and Viva Republica, the operator of popular mobile payment app Toss, failed to narrow the difference in stake ownership and funding plans for their future online-only bank, which could be the country’s third internet-only bank.

Shinhan Financial has bolted out of the consortium just a few days before the deadline to apply for a preliminary license for the country’s third online-only bank, throwing cold water on the upcoming bid as other major names like Naver and online retail major Interpark have also folded their project.

The Financial Services Commission (FSC) will accept applications for a preliminary license from March 26 to 27.

The leading lender’s pullout also can affect the other members on the Viva Republica-led consortium, which are Hyundai Marine & Fire Insurance, e-commerce platform provider Cafe24, online fashion store Musinsa, real estate platform operator Zigbang, and fintech software provider Korea Credit Data, known for its mobile accounting software CashNote.

Its withdrawal raised questions about the capital strength of Viva Republica, which would become the largest stakeholder with up to 34 percent in the new bank. An Internet-only bank in Korea is required to have an initial capital of 25 billion won ($22.2 million), but minimum 1 trillion won is needed to keep the business afloat.

Viva Republica reported a steady increase in sales from 3.5 billion won in 2016 to 20 billion won in 2017 and 56 billion won in 2018, but its peer-to-peer financial service is yet to make a profit.

Some also noted that Viva Republica wanted an innovative start-up system, whereas Shinhan Financial was seeking for an open banking system that focuses on easier access.

By Kim Dong-eun and Lee Ha-yeon

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