Banks, telecom firms enhance ties in advent of 'data economy'

By Lee Min-hyung

KB Kookmin Bank CEO Hur Yin

Commercial banks here are enhancing their partnerships with telecom companies as the era of “data economy” comes closer and competition from emerging financial players gets tougher.

With the so-called “three data bills” taking legal effect as of Aug. 5, companies from different industrial sectors are moving to join hands for potential synergies to develop more customer-oriented services by exchanging their big datasets.

The three bills are revisions to three existing laws on private information protection, information communication networks and credit information protection. The three data bills are aimed at allowing financial firms ― such as banks, card firms and insurers ― to form data-sharing partnerships with those from other industries, with a view to creating more value-added financial services.

Woori Bank CEO Kwon Kwang-seok

Banks are particularly speeding up their drive to enhance ties with local telecom players to jointly launch more accurate data-powered services.

The latest in a series of data partnerships between firms in the two industries came a week ago when Shinhan Bank signed an alliance with LG Uplus and CJ Olive Networks to carry out joint big data business.

Under the partnership, the interest parties plan to unveil datasets analyzing different consumption patterns in major commercial districts in Seoul. The three firms will share and converge their datasets with one another to create more valuable and detailed information on consumption patterns in each region in the capital city, according to the nation's largest lender.

Naver CEO Han Seong-sook

Starting last year, KB Kookmin Bank, one of the top-tier lenders along with Shinhan, has joined forces with LG U+ by launching the Liiv M budget phone service.

Lenders are also aggressively expanding partnerships with IT players, in their bid to compete with emerging financial players ― such as Naver and Kakao ― each of whom dominate the nation's internet portal and mobile chatting platform markets. They are making rapid inroads into the financial sectors by taking advantage of their massive user base.

Naver is particularly emerging as a potentially great threat to traditional financial players, with the company speeding up its drive to expand its internet foothold into the financial platform industry.

In November 2019, the company launched its subsidiary, Naver Financial, and has since launched Naver Bankbook which offers an annual interest rate of up to 3 percent. This is a significantly higher rate as compared to commercial lenders currently providing a deposit interest rate of around 1 percent amid the nation's prolonged low interest rate.

Kakao co-CEOs Yeo Min-soo, left, and Joh Su-yong

Kakao also identifies the financial sector as one of its next major growth areas. The company runs mobile payment subsidiary, KakaoPay, and is also seeking to expand its financial foothold into the mobile insurance industry.

Balancing regulation, deregulation

Industry officials argue that this is the right and forward-looking step for the government to foster the data-driven economy by introducing the data bill revision. But taking a balanced approach between regulation and deregulation is also crucial, as risks of hacking are ever present.

On top of that, any leakage of financial datasets from users results in incalculable damage to users and the corporate brand image.

Even if security technologies are being more and more reinforced, financial accidents ― mostly from unidentified hackers ― are showing no signs of abating here and abroad.

Earlier this month, Toss ― a mobile financial service platform operated by fintech startup Viva Republica ― was mired in such a scandal. Eight Toss users were hacked, with a total of about 9.4 million won in their accounts stolen.

“No financial players can say for sure that their platforms guarantee 100 percent security,” an official from one of the major card firms here said. “As was shown from the Toss case, financial players always put priority on protecting customers' datasets, even if pushing for innovation should also top the agenda for their future growth.”

The official further explained that deregulation is not the only key to taking the nation one step closer to success in the data-economy drive; a minimum level of regulations are also very important for sustainable growth of the industry.

The official also pointed out the convergence of technologies from a number of areas may make it harder and harder to track hacking sources further down the road.

“Even if financial platform providers do their best to maintain the highest level of security, hackers can track customer information by hacking users' mobile devices,” he said.