On Jan 27, the Korean Society of Fintech, led by Professor Kim Hyoung-joong, held a breakfast meeting at The Palace Hotel Seoul with fintech experts in attendance.
The meeting started with a lecture delivered by Kim Yoo-mi, senior director general of the IT & Financial Information Protection Department at the Financial Supervisory Service (FSS). Kim Yoo-mi’s lecture on fintech industry trends in and outside South Korea and government support policy was followed by a Q&A session with about 40 experts from industry and academia.
Kim Yoo-mi, senior director general of the IT & Financial Information Protection department at the FSS presented a 4-phase plan to promote the fintech industry.
With the fintech industry shaping up to become a future growth engine, calls for disruptive regulatory innovations are growing to speed up ICT companies’ entry into the finance business and tear down barriers to entry into the fintech industry.
Kim Yoo-mi said “Along with the emergence of online-only banks, fintech is fast evolving, so the Financial Supervisory Service is looking forward to a seismic change that can breathe new life into the Korean financial industry this year.”
The FSS is poised to develop the fintech industry in phases. Phase 1: barriers to entry into the fintech industry will be lifted. Phase 2: a fintech ecosystem will be created to run fintech support centers and support raising funds.
To create an ecosystem for fintech, a total of 200 billion won in fintech support funds will be provided (160 million won from Korea Development Bank, 100 billion won from Industrial Bank of Korea (IBK), fintech-only funds worth 20 billion won and 2 billion won from other seven financial companies).
In Phase 3, the paradigm of fintech regulations will be changed from ex ante regulations to ex post regulations, thus making it a rule to discontinue financial authorities-led deliberations on security issues and maintain technical neutrality and allowing using smartphones as a means of identity authentication. In Phase 4, to diversify and popularize fintech services, the areas of big data, online-only bank, online funding & consulting and online insurance will be intensively stimulated.
Kim Hyoung-joong, chairman of the Korean Society of Fintech said: “Even though South Korea has excellent information and communication infrastructure and smartphone manufacturing technologies under its belt, excessive regulations have undermined our competitiveness. A case in point is that the public key certificate system prevented Chinese online shoppers from purchasing the same coats Cheon Song-Yi (played by Korean actress Jun Ji-hyun) wore in South Korean television series “My Love from the Star.”
“Financial authorities should urgently find out regulations that are unique to South Korea and take advanced approaches towards how to manage such Korea-only regulations.” Kim added.
Cho Sung-kap, chairman of the Ethics Council on Internet, said, There has been a paradigm shift affecting the workings of the world. Silicon Valley that values creative ideas has become the world’s startup center; the fintech industry is booming. The secret of Silicon Valley’s success lies in the private sector’s unregulated competition, not in American regulations or government support. In line with such global trends, the Financial Supervisory Service needs to be renamed into something promotive that does not include the word ‘supervisory’ and drastically carry out regulatory reforms.”
Another attendee, CEO of a startup preparing to enter the mobile payment market, considered mobile payment services as the nation’s most heavily-regulated sector that discriminates against its own companies. While Korean IT companies wanting to enter the financial market are getting entangled in regulations, global companies like Alibaba, Tencent, PayPal and Alipay have already penetrated deep into the Korean market.
All the regulations devised solely in consideration of domestic market conditions are holding back Korean Internet service companies.
Meanwhile, Korean fintech companies say that joining hands with foreign capital is much easier than teaming up with Korean financial institutions. Korean companies that have already secured key technologies are showing a keen interest in entering foreign markets, not the domestic market. “Foreign capital will take over the Korean fintech industry in the foreseeable future,” said a Korean fintecher.
The Korean Society of Fintech will hold the Korean Fintech Forum on Feb. 14-18 and plans to hold a joint international conference on ‘fintech, innovation and sustainability’ in San Jose, California.
