Reporter's Notebook Is Naver Financial abusing power of No. 1 portal?

Naver COO and Naver Financial CEO Choi In-hyuk / Courtesy of Naver

By Kim Bo-eun

Naver's entry into the financial services sector has had financial firms on their toes, due to the immense influence it wields as Korea's top portal. Naver lacks expertise in finance, but can partner with companies in the sector and bring massive amounts of traffic to its platform.

Naver Financial, Naver's subsidiary established last November, serves as a financial services platform. Customers will likely be able to sign up for various financial services Naver offers in partnership with companies including securities firms and insurers. While Naver's platform is set to help firms with their sales in general, it will serve as a lifeboat for financial firms that lack brand value.

The use of Naver's traffic drawing platform, however, comes at a cost. According to industry sources, Naver recently called for non-life insurers to pay a hefty fee to present their products on its platform.

Under this model, Naver Financial serves as a platform offering comparisons of car insurance policies of various insurers. The insurers point out that there is already a similar platform, which does not require them to pay any fee.

Naver, however, has requested an 11 percent fee from insurance premiums. This nears the maximum percentage of the fees that sales agents collect for selling insurance policies ― the rates range between 5 percent and 12 percent.

Naver's platform enables customers to compare different policies and sign up for one. One of Naver Financial's main businesses is its easy online payment system, through which online shoppers can make payments either using their credit cards or with Naver Pay.

Usually, when customers sign up for a policy online, insurance premiums are lower because this saves the fees that would have gone to the sales agent.

However, Naver has drawn up a model under which customers will likely not see premiums cut, even while eliminating sales agents, because the platform takes the fee.

Regarding the issue, Naver Financial stated it is currently reviewing the platform service. "An agreement has not been reached on the fee system," an official of the company said.

Naver may adjust its fee rate. But an unchanging fact is the dominance Naver possesses as the most widely used portal.

Another major competitive strength Naver possesses is its access to huge pools of data accumulated from online shopping transactions, as Naver Shopping has grown into Korea's largest e-commerce platform.

Naver's brand value, traffic and data put it in a position where partnering firms will pay the price it demands. Concern is already prevalent among insurers.

But financial firms' interests will prompt them to cooperate with Naver and ultimately financial consumers will be the ones who will lose out in the setting of Naver's dominance.

Consumers may be enticed by Naver's product comparison services and easy payment mechanism but could end up paying a higher price.