Hosted by the Korean Society of Fintech (led by Professor Kim Hyoung-jung) and the International Network of Korean Entrepreneurs (INKE), the 1st Korean Society of Fintech Seminar was held on July 10 at Korea University in Seoul.
At the seminar which pivoted around discussions on ways to soup up the fintech market and policy proposals, Ju Yong-wan (head of the Internet Industry Innovation Division at the Korea Interent and Security Agency (KISA)) stressed, “Bill Gates predicted that “We need banking but we don't need banks anymore.” In line with this “me-centric” era when businesses are committed to customer-centric value creation, businesses should vie for consumers’ time.”
According to market research firm Venture Scanner, as of April 2015, roughly 1,100 global fintech firms were offering fintech services around the globe.
With Google, Apple, Amazon and Samsung Electronics emerging as new financial players, financial data brokers and providers of fintech service platforms are coming out with new financial business models.
Who will become the world’s largest purveyor of mobile-centric branchless banking services
“Now is the time to ponder who would become the world’s largest mobile-centric branchless financial institution,” Ju Yong-wan mentioned.
As TechTarget’s Tom Goodwin put it, Uber, the world's largest taxi company, owns no vehicles. Facebook, the world's most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world's largest accommodation provider, owns no real estate.
Developed countries have been moving fast to rev up their fintech industries. Take the UK, one of the global financial hubs, for example. George Osborne, Chancellor of the Exchequer, announced his plans to make the UK “the fintech capital of the world in 2014. Level 39, Europe’s largest accelerator space for fintech start-ups, was opened in London in 2013.
Furthermore, the UK's Financial Conduct Authority (FCA) set up an “Innovation Hub,” dedicated to supporting innovation in financial services. As of 2013, the number of fintech workers reached 44,000 in London.
Global household names, such as HSBC and Barclays, have also jumped into the fintech fray.
The US has been banking on New York, the center of global finance, and Silicon Valley, a mecca for IT start-ups. As of 2013, there were 43,000 fintech workers in New York and 11,000 in Silicon Valley.
Large investment banks in New York and venture capital firms in Silicon Valley are pouring money into fintech projects. With the implementation of a No-Action Letter (NAL) policy (a regulatory mechanism that addresses regulatory uncertainties associated with the offering of innovative financial products and services), the US has scrapped unreasonable regulations by carrying out cost-benefit analyses of regulatory costs.
China, despite its inadequate financial infrastructures, has been pressing ahead with an IT-centered fintech strategy. The cases in point are Alipay and Yu'e Bao. Online payment services like Alipay and TenPay are expanding into fintech services like Yu'e Bao and internet-only banks (or virtual banks).
Nonghyup (NH) Bank poised to connect producers directly with consumers
Lee Hak-jin, head of the Mutual Finance Savings Team at the National Agricultural Cooperative Federation (NACF), introduced Nonghyup Bank’s fintech strategy at the seminar.
NH Bank has top-of-the-line financial infrastructures in S. Korea. It is the largest bank in the nation by assets: 255 trillion won in total assets, 245 trillion won in deposits received and 168 trillion in loan balance. The number of NH Bank customers stands at 29.6 million with 4,577 branches and 18,661 CD/ATMs nationwide.
“NH Economic Holdings engages in distribution, manufacturing, food and logistics while NH Financial Holdings encompasses banking, insurance and securities and assets management,” Lee said.
NH Bank is currently working on the development of a fintech-based online/offline financial convergence system.
“We seek to build a smart finance system that feels like a face-to-face transaction channel. We will segment our financial product malls and set up differentiated product markets. And we are expanding our offerings of non-face-to-face products through omnichannel retailing,” Lee added.
Financial products will be recommended in connection to asset management services and a total online market selling financial products will be set up. NH Bank is also paying keen attention to UX (user experience) and UI (user interface) designs so as to ensure the provision of customer-friendly, easy-to-use services.
NH Bank’s Mobile Nanum (sharing) Loan Service is a financial brokerage service for ordinary people which is based on big data analytics and fintech. It connects borrowers with potential lenders (Nonghyup or Chukhyup), thereby offering borrowers the benefits of low interest rates.
“The Farm P2P Lending is a peer-to-peer lending platform that enables the direct supply of loans to individual borrowers, who need money to cultivate crops, process agricultural products or raise working capital. Connecting farming communities with consumers in urban areas, it is expected to pay the way for direct transactions, with the addition of the pre-purchase model,” he added.
There are neither global financial institutions nor global services firms in S. Korea.
Meanwhile, Korean financial companies and services firms have yet to grow to global proportions. According to the Korea Institute of Finance (KIF), several Korean banks, including Woori Bank, KB Kookmin Bank, Shinhan Bank, KDB Bank and Hana Bank are included in the global top 100, but they have less than USD 30 billion in capital, the lowest among the top 100.
Since 2014, Citi Bank, armed with a digital platform capability, has hosted the Citi Mobile Challenge, a global virtual competition, designed to seek out innovative fintech solutions. The sponsors of the Citi Mobile Challenge are Intel, IBM, Uber, MasterCard, etc.
In the number of fintech firms as of 2014, the US came out on top with 54 fintech firms, followed by India (11) , France (5), Switzerland (5), the UK (5), Canada, Brazil and China, according to American Banker & BAI.
Removal of finance and online business regulations is the key to the success of fintech.
Experts point out that finance and online business regulations, i.e. overlapping regulations, stunt the growth of fintech in the nation.
“There are numerous financial consumer protection measures in the finance industry. In fact, the finance industry has more regulations than any other industry. The government’s principle of “the separation of industrial and financial capital” is still put in place. And there are minimum capital requirements for providers of banking services,” said Koo Tae-eon, the chief attorney at TEK & LAW.
Experts still take a wait-and-see attitude towards the Crowd-funding Act, which puts a ceiling (700 million won a year) on the amount of money a company can raise through crowd funding. And the Act also limits general investors’ annual investment to 5 million won.
“Also there is a one–year ban on the resale of crowdfunded securities among investors. The sale of crowdfunded securities by the issuer and large share holders is also prohibited for one year. Thus, it remains to be seen whether crowd funding will successfully put down roots in the nation,” Koo added.
