Hana Financial Group (HFG), one of the largest bank holding companies in S. Korea, is expanding its global business through ‘1Q Bank’ (a global digital banking platform). The HFG has launched 1Q Bank in markets where it’s shown a strong retail banking performance (such as Canada, China, Indonesia) while creating new value-added opportunities through 1Q Transfer (a fintech-based overseas remittance service) which covers all of HFG’s overseas networks.
To learn more about HFG’s fintech strategy, The Korea IT Times arranged an in-depth Q&A Fintech Talk between Han Jun-seong, Chief Future Innovation Officer (CFIO) at HFG, and Prof. Kim Hyoung-joong, chairman of the Korean Society of Fintech. Kim Hyoung-joong received his PhD from Seoul National University. He is a Professor of Korea University
Kim: How many people are committed to HFG’s fintech business
Han: We don’t have a separate fintech taskforce. Instead, we have the Future Financial Group. Much of the Future Financial Business Division’s work is related to fintech. Three divisions - the Future Financial Business Division, the Global Business Division and the New Growth Engine Division- are taking care of HFG’s fintech business.
Kim: The financial environment is rapidly changing. I heard the banking sector will cut its workforce by 2,000 people. Isn’t there any managerial pressure
The job title of CFIO (Chief Future Innovation Officer) is unprecedented in South Korea. CFIO Han speaks for HFG’s future finance.
Han: We need to know why. There is a paradigm shift taking place in the market, so changes should be made to finance. Nothing is visible but something should be changed. This is a challenge the financial sector is wrestling with now. It is important to know where your anxiety comes from. I put a high premium on ‘customer experience.’
In other words, basically, freeconomics is becoming consumer-oriented. No one pays for looking up things on the Internet. When consumers receive some services, they get used to something free-of-charge. In freeconomics, consumers are taking the center stage. However, banks have been thus far strictly banking on a supplier-oriented model.
The younger generation of consumers rarely makes a trip to the bank, so they have little experience with banks. They ask whether there is any need for them to drop by a nearby bank branch, which puts a big question mark over the future of financial incumbents.
Then, we need to think about what causes people to make fewer visits to bank branches. It is fintech and digital finance.
Traditional banks are insensitive to technological changes, consequently failing to meet new consumer demands. We need to fill the ‘digital gap’ by embracing fintech.
While financial incumbents are not responsive to changes, fintech startups are picking up the slack, making a play for financial incumbents' métiers.
We call it the digital gap. Since fintech firms are doing the job of filling the digital gap, the fintech market will expand, eating into the traditional banking sector.
Then, if traditional banks take the plunge into fintech, will the digital gap be narrowed This is quite another issue. From such a point of view, we think our mission is to craft a strategy on how to present future experiences to our customers.
Kim: I thought that financial incumbents with a vested interest in the financial business were insensitive to changes.
Han: In the past, bank tellers instructed customers to do something. Nowadays, the tables have been turned. Customers teach bank tellers. They say, “I’ve heard some new service is available in the market and I wonder why your bank isn’t offering the same kind of service.” This is a huge change.
Banks are now playing catch-up with customers. The banking sector was mighty and highly regulated so that it always led customers, not vice versa.
Take the automobile industry for example. Carmakers are all catching up with customers. They are trying to keep pace with changing customer preferences and needs. Other industries have already gone through what the banking sector is going through right now. The emergence of online services, new technologies and new digital experiences had us following in the footsteps of distribution companies. This explains the birth of fintech.
Kim: Well said, Han.
Han: It took distributors less than seven years to adapt to changes. Now, it will take us 3-4 years. Then, banks will go through what distributors went through until 2019. Thus, we need to take our cue from distributors.
I am afraid that something equivalent to CitiBank could emerge in the fintech sector. Though the characteristics of the financial industry are not the same as those of the distribution industry, it is not completely implausible.
Kim: Hence the financial sector has no other way but to go through changes.
Han: To bring changes, I believe we have to make invisible changes visible to the eyes of employees. Thus, I think we have to let employees have hand-on experience with digital technology. I’m not talking about the experience of shopping online as an online consumer. I want employees to experience things from the perspective of producers. Thus, I am thinking about teaching our employees coding.
I think employees who develop financial products cannot do their job properly without having any first hand knowledge of smartphones structures.
My job title is CFIO (Chief Future Innovation Officer), which is unheard of in this country. My job title hints at what situation the HFG is in today.
For the past five years, I have received numerous requests for lectures from abroad. When BNP Paribas was developing Hello bank!, they asked for my advice. I actually gave a lecture to BNP Paribas executives.
Hana Members, designed to monetize intangible assets
How could a tradition bank come up with such an innovative service
Innovation will not take place unless employees think about digital technology. That’s why employees have to study digital technology. When they get the hang of it, the way our financial products and services are delivered to customers will change. We have thus far delivered our products over the Internet, but it will change. We are constantly asking questions like “Is there any other way to make financial transactions without logging in to our website (www.hanabank.com)
As we developed several strategies one by one, membership service Hana Members was created along the way. As a matter of fact, Hana Members is basking in attention. The Samsung Economic Research Institute (SERI) has recently posted a video lecture to introduce innovative financial services including Hana Members.
The key to Hana Members is to monetize intangible assets held by customers.
Platforms are no longer the preserve of IT companies. Hana Members is our financial platform.
Kim: Banking also needs a platform, doesn’t it
Han: It’s people that make platforms work. What matters most is how well a platform is managed by people. Heavy user traffic is required in making a platform evolve on its own. It will make or break a platform.
All of a sudden, platforms have become exclusive playgrounds for IT companies. Should banks bring their payment services to a platform However, the platform-based payment service sector is dominated by IT companies. Then what can we bring to a platform
Financial platforms have disappeared. Therefore, we are aiming to make a comeback this time. We can bring a financial platform to Hana Members. Hana Members is gathering people and evolving on its own. Hana Members started to have companies on board. Now, the number of companies which want to join Hana Members tops 100. This is possible because Hana Members is a platform after all.
