Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Fintech startups set to challenge major lenders
Financial Services Commission Chairman Eun Sung-soo (center) tests an online transaction service offered by Kakao Pay, at the Westin Chosun Hotel in Seoul, Wednesday when the regulator held an event to celebrate the launch of the open banking service nationwide. Yonhap
By Lee Min-hyung
By Lee Min-hyung
With Korea heralding a new era of “open banking” on Wednesday, competition is expected to heat up between major lenders and fintech startups, in their bid to grab an upper hand in the banking paradigm shift.
Open banking refers to a new banking system under which a user can check all their accounts from different banks using a single mobile application.
The nation's 10 major commercial banks started its pilot service Oct. 30. More than 3.15 million people across the nation subscribed to the open banking services from the beginning of the trial service to Dec. 17.
Starting Wednesday, the nation's chief regulators announced the full-fledged operation of the service here.
This enables 16 lenders and 31 fintech companies here to operate their open banking services, according to the Financial Services Commission (FSC). Citibank and Kakao Bank will also join the bandwagon in the first half of 2020.
“Market players should compete in a way to enhance quality of financial services, as the open banking will offer a highly efficient financial infrastructure at a low cost,” Eun Sung-soo, chairman of the FSC, said in an event to celebrate the official beginning of the open banking service here, Wednesday.
Small fintech firms were not qualified to join the list of the 10 pilot test operators. But with the arrival of the full operation of the service, more startups in the financial industry are expected to join the open banking competition and challenge traditional lenders in 2020.
“Fintech startups are much more agile in introducing new creative services to their platforms, compared to traditional banks,” said an official from one of the 31 startups which started the opening banking service.
“For instance, some fintech startups, such as Toss and Bank Salad, have expanded their presence very rapidly on the market, as they won favorable market responses for their banking data analytics tools which were not offered by existing lenders,” the official said.
Major lenders ― such as KB Kookmin, Shinhan and Woori ― appear to be taking a “wait and see” attitude over the possibly toughening rivalry against startups.
“As the service is still in its infancy, we put our focus on coming up with ways to offer better and more convenient open banking services for users,” an official from KB said.
“For now, we do not view startups as a competition counterpart, but a partner to develop better platforms and services,” the official said. “It remains to be seen how open banking will change the paradigm shift in the financial industry.”
During the event, the chief of the FSC also expressed his willingness to expand the service by allowing more financial players to take part in the open banking.
“In 2020, we are considering options allowing second-tier financial institutions to offer open banking services,” he said.
To lay legal grounds for the open banking, the FSC also plans to revise a bill on electronic financial transactions next year.