The first-tier financial institutions are gearing up to make the best of a golden opportunity to attract a large number of individual customers, as the bank account switching system is scheduled to take effect on Oct. 30.

Pledging to enhance the country’s financial sector by nudging the industry into stronger competition in 2013, policymakers announced that bank customers would be allowed to switch banks without having to adjust their deposit withdrawals.

Some critics, however, do not foresee any big impact as it mostly targets domestic individuals, most of who already have one first-tier Korean bank account. Further, corporate clients are excluded due to their massive loan deals.

“Some banks will certainly be deprived of their long-standing customers, and there is a possibility that the winner will take a dominant share of customers who opt to switch accounts -- which could trigger an oligopoly,” said a financial sector executive.

Under the existing system, customers who set up monthly automatic payment or transfer -- for utilities, insurance and other living expenses -- under a single bank, have to cancel or change every single item when they switch accounts.

However, under the new switching system, all they need to do is log in to Pay Info webpage with their electronic authorization certificate, and switch all of the automatic settings of their former bank to another bank.

Authorities expect that the switching process at Pay Info will take less than five days.

The bank account switching system has faced resistance from local banks, as the country’s total balance of cash management accounts amounts to 491 trillion won ($434 billion), according to the Financial Services Commission.

Since summer, major banks have already launched a series of new promotions, such as banking fee exemptions, higher interests and mileage plans, to retain their customers.

In September, KEB-Hana Bank launched “Happy Together Package” that offers relatively high-interest profit.

KB Kookmin Bank launched a package account product that combines saving deposits, installment savings, card service and loan service. The package deal offers free cross-bank wiring and ATM services.

Shinhan Bank’s latest savings deposit plan offers free banking service fee for people aged 40 and under, if they receive their monthly salary through its account. For those aged 50 and above, the bank offers higher interest if they receive their pension income through a Shinhan account.

The switching system applies to the 16 existing local banks, and could be expanded to the second-tier banks and brokerages, the regulator said.

By Chung Joo-won (joowonc@heraldcorp.com)