Coupang to enhance fintech business

Chung Bo-ram, head of Coupang's fintech business

By Park Jae-hyuk

Coupang has stepped up its efforts to bolster its fintech business as a new growth engine by hiring outside financial experts, as the company is reeling from ballooning losses from its e-commerce business.

Analysts see it as a meaningful attempt but expect the firm to face a bumpy road ahead, as it could have problems complying with regulations targeting financial services companies.

Since it appointed representative director Chung Bo-ram as the head of its fintech business in April, the e-commerce firm has repeatedly hired financial experts here and overseas, in order to boost its financial business with the CouPay simplified payment system.

On Friday, the company said it appointed lawyer Lee Jun-hee, who had been serving as a Hyundai Card executive, as its new vice president.

At Hyundai Card, Lee gave legal advice to the card issuer when it was developing fintech services, including the establishment of a big data analysis platform, an artificial intelligence-based chatbot service and the development of robotic process automation.

When he worked at the Kim & Chang law firm, he was in charge of fintech and financial regulations.

According to Coupang, the new vice president will be in charge of any legal issues that may arise regarding the firm's fintech and payment services, such as OneTouch Payment, CouPay, CouPay Money and its fraud detection system.

“Coupang, which has come up with a new vision, has challenged every sector including payment systems, is always putting an emphasis on its customers,” Lee said in a statement. “I'm happy to join a future- and customer-oriented company which has the ability to change the lives of its customers.”

Earlier in October, Coupang also hired Kevin Warsh, a former Federal Reserve governor and a former Morgan Stanley executive, as its non-executive director.

At the time, Warsh said, “Coupang is at the frontier of innovation,” hinting that he would help the company's innovation in the financial sector.

The nation's financial authorities, however, have continued to send warning messages to the e-commerce firm's attempts to do the financial business.

In April, the Financial Services Commission recommended Coupang stop paying interest to its customers who deposited their money in Coupang's simplified payment system, regarding the interest payment as an unauthorized fund-raising business.

Coupang and other simplified payment service providers attracted their customers with the interest payments, but the regulator said customers may lose their money because they cannot be protected under the Depositor Protection Act.

In addition, the Financial Supervisory Service (FSS) in September recommended Coupang come up with a plan for management improvement, citing its low capital adequacy ratio.

According to the FSS regulation, a company's ratio of capital to unpaid balance has to be at least 20 percent, if the company is an issuer of digital cash or a prepaid electronic payment service provider.

“As Coupang did not carry out its planned capital increase in March, its capital adequacy ratio fell below the standard,” an FSS official said at that time. “We urged the company to come up with a management improvement plan and report the results regularly.”

In response, Coupang said it has attracted enough foreign investments and increased its capital by 150 billion won ($128 million) in September and 500 billion won in June.

Analysts, however, have been skeptical about Coupang's future, expecting it will suffer a 1.5 trillion won loss in 2019.

“Although Coupang has shown a surprising growth since the second half of last year, it is doubtful whether investors will give high marks to its business model which has not shown any significant way of making profits so far,” Yuanta Securities analyst Lee Jin-hyeob said in his recent report.

Korea Investors Service analyst Han Tae-il said Coupang will be unable to be a market-dominating company like Amazon, although both companies have sought to achieve economies of scale while enduring losses.

“For Coupang to maintain the current amount of sales, trillions of won should be injected into the company,” Han said in his recent report. “It has failed to make profits on its own, so it is highly expected to rely on external funds once again.”