New system should serve as priming water for innovative financing
Korea launched preliminary services for an open banking system Wednesday, hoping that they will prime the pump for financial innovation. Ten commercial banks, including KB, Shinhan, Woori and KEB-Hana, began offering trial services with others expected to follow their lead in line with their preparatory status. Non-banking retail lenders, such as savings banks, will offer the system from next year.
The new system allows bank customers to use any mobile application of their choosing to access their bank accounts at any local bank, and also to withdraw or transfer their savings from any bank account. The financial authorities have slashed transaction costs to about one-tenth of the current level, and so consumers will be able to use far more convenient financial services at sharply reduced rates.
For the next few months, only banks will provide the new service. On Dec. 18, however, the open banking system will be in full swing as the banks open their payment systems to fintech firms as well. The ultimate purpose of the open banking system is to activate custom-made services through various analyses of publically available data. In other words, it is the facilitator of the "My Data" industry.
Its potential is huge. More than 100 fintech firms have applied to the Korea Financial Telecommunications and Clearings Institute for preliminary access to the open banking services. That means about 150 financial firms, including banks, will be competing to provide innovative financial services soon. In the not so distant future, not only deposits and withdrawals but also lending and asset management will become possible through the system. What types of new services will become available is anybody's guess.
Of course, not all outlooks are rosy. As more and more information becomes increasingly available, the chances of unlawful data leaks and security incidents will also grow larger. Enhancing security will be necessary to prevent cyberattacks and voice phishing. Financial regulators are working out various safety measures by, for instance, allowing only those fintech firms which pass a security check, and obliging them to get surety insurance. The authorities concerned also ought to continue to seek a balance between the use of private data and the protection of privacy.
Korea launched preliminary services for an open banking system Wednesday, hoping that they will prime the pump for financial innovation. Ten commercial banks, including KB, Shinhan, Woori and KEB-Hana, began offering trial services with others expected to follow their lead in line with their preparatory status. Non-banking retail lenders, such as savings banks, will offer the system from next year.
The new system allows bank customers to use any mobile application of their choosing to access their bank accounts at any local bank, and also to withdraw or transfer their savings from any bank account. The financial authorities have slashed transaction costs to about one-tenth of the current level, and so consumers will be able to use far more convenient financial services at sharply reduced rates.
For the next few months, only banks will provide the new service. On Dec. 18, however, the open banking system will be in full swing as the banks open their payment systems to fintech firms as well. The ultimate purpose of the open banking system is to activate custom-made services through various analyses of publically available data. In other words, it is the facilitator of the "My Data" industry.
Its potential is huge. More than 100 fintech firms have applied to the Korea Financial Telecommunications and Clearings Institute for preliminary access to the open banking services. That means about 150 financial firms, including banks, will be competing to provide innovative financial services soon. In the not so distant future, not only deposits and withdrawals but also lending and asset management will become possible through the system. What types of new services will become available is anybody's guess.
Of course, not all outlooks are rosy. As more and more information becomes increasingly available, the chances of unlawful data leaks and security incidents will also grow larger. Enhancing security will be necessary to prevent cyberattacks and voice phishing. Financial regulators are working out various safety measures by, for instance, allowing only those fintech firms which pass a security check, and obliging them to get surety insurance. The authorities concerned also ought to continue to seek a balance between the use of private data and the protection of privacy.
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