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| Jung Yoo-shin, chief of Fintech Center Korea and dean of Sogang University's Graduate School of Management of Technology speaks during an interview with The Korea Times at his office at the school in Seoul, July 31. / Korea Times photo by Choi Won-suk |
Fintech support center chief cites regulations as stumbling block
By Kim Bo-eun
Korea is known for its advanced ICT infrastructure, but development of the fintech industry has been relatively slow.
While it has a few startups on KPMG's list of top global fintech companies, their impact has been limited.
IT conglomerates Kakao and Naver are gearing up to play a greater role in finance, but are currently face barriers in making their next leap.
Jung Yoo-shin, chief of Fintech Center Korea, says this is due to regulations that currently do not allow for statistics on customer data to be used for commercial purposes.
"A revised bill is pending at the National Assembly," Jung told The Korea Times in an interview last month.
"Access to big data is key to taking Korea's fintech to the next level."
Stages of fintech development
Jung defines the process of the development of fintech according to four stages.
The first is the phenomenon of "unbundling," which means customers tear apart the bundle of financial services they have been accessing, commonly a single medium or entity such as a bank.
"In the past, customers would transfer funds, get loans and access other services through their main bank," he said.
"Now they opt for the most convenient services, which means they could get each of the services they need from a variety of entities."
When entities offering a single service succeed in attracting enough customers through competitive services, they evolve into platforms ― the second stage.
An example is Toss, which began with mobile money transfers, and now has become a platform through which users are able to make savings and get loans as well as invest through mutual funds and stocks.
The following key stage is when platforms seek to differentiate themselves through utilizing technology and data.
"This is the stage where artificial intelligence (AI), blockchain, cloud, big data, internet of things and 5G are merged into the platforms to offer customized services," said Jung, who is also the dean of Sogang Graduate School of Management of Technology.
"Korea has begun incorporating AI but has yet to do the rest."
When data is shared freely, finance is able to play an infrastructural role that can bring up productivity of other industries, like IT does, Jung said. This is the fourth stage.
"This is when finance and non-financial sectors come together to create synergy."
Jung noted a number of big tech companies in the U.S. and China have reached this fourth stage.
Korea's approach to regulations
Essentially, regulations are standing in the way of fintechs' further development, Jung said. He referred to the different environments of countries such as the U.S. and China that have led the global fintech industry.
"The commonality of the countries is their government approach to regulations," he said.
"When trying to develop a new industry, they first allow new attempts and then regulate or come up with complementary measures if necessary. In Korea, initiatives face regulations first."
Jung said this may be why globally, fintech started developing a decade ago and in Korea only five years ago.
Still, the government deserves some credit, as it has recently started implementing regulatory sandboxes for new initiatives to be tried out, he said.
"A foreign index shows Korea's utilization of fintech has grown to 70 percent in two years," he said.
Future of Korea's fintech
While tech giants of the U.S. and China are playing a leading role, Jung said Korea could also have competitiveness as an exporter of technology in this industry to other fast-growing economies.
"Korea may be a step behind, but still has competitiveness in applying existing technology," Jung said.
"This is where the role of the Fintech Center Korea comes in, by linking competitive technology to investment and helping the technology to be applied to global practices."
He noted this could achieved by joint ventures between local fintech startups, or between local fintech startups and financial firms, or between local entities and foreign entities in the market they seek to enter.
Fintech Center Korea was established in March 2015 and Jung has headed the center since. Before then he served as Standard Chartered Bank Korea's executive vice president and as CEO of Standard Chartered Securities Korea.
The center, which started out privately funded, now also receives funding from the government.
It helps fintech startups with their business models, and outlines the government's policies affecting them as well as legal and supervisory precautions. The center also helps the entities with financing, connecting them to potential investors through events such as demo days.
