South Korea’s financial regulator rejected on Sunday applications by two consortia to set up two digital-only banks, South Korean news agency Yonhap reported. The first consortium was led by fintech firm Viva Republica and the other by brokerage Kiwoom Securities.

The Financial Service Commission accepted the verdict of an independent evaluation committee that the two consortia had put up inadequate bids to start digital banks.  The industry expected at least one of the consortia to win a licence to set up a digital bank.

According to the outside evaluators, Viva Republica lacked the financial resources to back up its plan. Kiwoom, the evaluators said lacked feasibility and innovation in its proposal. The FSC Chairman Choi Jong-ku said that the commission will accept further applications to set up digital banks in the third quarter with the approval expected in the fourth quarter.

Viva Republica operates the popular South Korean financial services fintech app Toss. Its consortium included Hanwha Investment and Securities and foreign venture capital firms Altos Ventures of the US and Goodwater Capital of the UK.

Kiwoom Securities together with its subsidiaries provides online brokerage services in South Korea and globally. Its consortium for the potentially fourth South Korean digital bank included SK Telecom and Hana Financial Holdings.

South Korea currently has two digital-only banks – K-Bank and Kakao Bank, both of which were launched in 2017. The introduction of these digital banks in South Korea forced traditional banks to cut commission fees and revamp their online and mobile banking offerings.

Last September, South Korea’s national assembly passed a bill that allows non-financial firms to boost their stakes in digital banks beyond the 4 percent ownership ceiling. Critics were of the opinion that the ceiling effectively prevented innovative South Korean fintechs from entering the digital banking scene. The intention of creating the ceiling was to prevent big Korean conglomerates from using such banks as a private cash reserve.