The South Korean government plans to boost the country’s weakening financial industry by strengthening the use of information technology in financial services – known as fintech. According to Shin Je-yoon (Chief of Financial Services Commission) the government plans to unveil a policy to encourage the development of financial technologies this month.
Speaking at his New Year’s address Je-yoon said: “The government plans to shift its regulation paradigm since global tech giants such as Alibaba, Google and Apple are muscling into the financial market with technology-driven diverse services ranging from money transfer to investment brokerage.”
This viewpoint was shared by many of the local financial groups’ chiefs in their New Year’s messages, emphasising the need to take advantage of new technologies in the industry.
Although South Korea is home to a number of advanced technologies, its financial technology industry is still far behind other nations such as the US and China because of its strict financial regulations. This year however, the South Korean government has pledged to ease regulations and grow the fintech sector in a bid to stimulate the flagging industry.
“In order for online banks to work, the government needs to deal with real-name system and the strict separation of commerce and banking, both of which need public consensus,” Kang Seo-jin (Researcher at KB Financial Group) told the Korea Herald.
According to reports the financial industry is counting on the success of the fintech sector this year because of the rapid growth of competitors in the global market and the fast-evolving nature of the business.
During a KIF seminar in December, Choi Gong-pil (Senior advisor at Korea Institute of Finance) said: “We had suggested our vision for fintech five years ago but there was much resistance from the industry back then.” He also warned that the Korean financial industry should look back at the case of the mobile phone market, where despite their advanced technology Korean companies were slow to react to change and were overtaken by Apple. Gong-pil warned that this could happen again if financial companies do not react actively to this trend.
The Korean government plans to relax the rules surrounding the strict separation of commerce and banking services, which makes it difficult for tech firms to move into the financial industry. The FSC is also reportedly considering easing regulations on the real-name system which requires users to visit banks with identification credentials to open a bank account, to allow tech companies to set up online banks easily. Financial authorities are also reviewing a clause which only allows industrial companies to hold four per cent of a bank’s shares, to allow tech companies to hold more than four per cent.
By Nicole Miskelly, bobsguide Lead Journalist