South Korea’s Banking Agency Business: Pilot Operations and Legal Hurdles

South Korea is moving forward with plans to expand financial services through post offices, a model successfully implemented in countries like Australia and Japan. However, the rollout faces challenges, including delays in product selection and the need for revisions to the Banking Act.

Pilot Operations Underway

Four major commercial banks – KB Kookmin, Shinhan, Hana, and Woori – along with Korea Post, are actively engaged in working-level meetings to establish pilot operations for banking agency services. These meetings, initially conducted remotely, transitioned to face-to-face discussions at the Korea Federation of Banks last month. The initial focus of the pilot program will be on credit loans and microfinance products, with approximately 20 general post offices nationwide expected to participate. Financial authorities aim to sequentially expand the number of participating post offices as the program progresses.

Challenges in Implementation

Despite the commitment to launch pilot operations in the first half of 2026, several hurdles remain. A key challenge is the selection of specific loan products to be offered through the post office network. Each bank offers around ten different loan products, requiring a careful selection process. Once products are chosen, the development of necessary business processes and computer systems can be completed relatively quickly. However, a more significant delay is anticipated in training post office employees to handle these new products, particularly those unfamiliar to the postal service, such as microfinance offerings. Bank officials estimate that employees may require a month or more to become proficient with new products.

The Need for Legal Reform

A significant impediment to the full development of the banking agency business is the current state of the Banking Act. Like Japan, which has a robust banking agency system allowing for a wide range of banking operations at post offices – including account opening, lending, and foreign exchange – South Korea requires legal revisions to fully enable the potential of this model. A proposed amendment to the Banking Act, introduced by Democratic Party of Korea member Lee Jeong-moon in July 2025, has been stalled for over six months. Lee Si-yeon, a researcher at the Korea Institute of Finance, emphasizes that the lack of revision to the Banking Act limits the revitalization of the banking agency business.

International Precedents

The South Korean initiative draws inspiration from successful models in Australia and Japan. Australia has utilized post offices for banking services since 1995, primarily in rural areas. Japan, with the most active banking agency business globally, revised its Banking Act to allow comprehensive banking operations at post offices while simultaneously strengthening financial consumer protection measures through increased bank responsibility.

Looking Ahead

The successful implementation of the banking agency business in South Korea hinges on swift resolution of the product selection process, effective employee training, and, crucially, the timely revision of the Banking Act. Addressing these challenges will be essential to realizing the potential benefits of expanded financial access through the nation’s post office network.