Korea urged to become Asia's fintech center

By Kim Jae-kyoung

SINGAPORE ― The United States, the United Kingdom and Singapore have been working hard to transform their major cities into fintech hubs as whoever takes the initiative in financial technology will not only change the ecosystem of the business world but also influence the pecking order of international cities.

Still, there has yet to be a clear fintech center in Asia. Singapore and some Asian countries, such as China and India, are moving ahead, but there is still a chance for Korea.

In 2015, the fintech investment in Asia more than quadrupled to $4.3 billion, while globally it rose 75 percent to $22 billion.

“Fintech is certainly going to be a game changer. However, it is hard to predict how it will affect the competitiveness of financial centers,” Mark Yeandle, associate director of UK-based Z/Yen Group of Companies, said.

“Seoul performs well in the innovation measures that we track,” he added. Yeandle is the author of the Global Financial Centers Index.

In a report titled Fintech 100 released in December, 2015, KPMG unveiled the list of top 100 most innovative fintech startups around the world.

The top 100 list includes 40 companies from the Americas, 20 companies from Europe, the Middles East and Africa, 18 companies from the UK, and 10 companies from Australia and New Zealand.

There were only 12 firms from across Asia; but there was not a single Korean player that made the list. Among the top 100, only two Chinese firms were on the list.

This gloomy result shows both the dark and bright sides Korea is faced with.

On the dark side, it indicates that both the government and fintech startups have failed to recognize opportunities created by the globally burgeoning market and don’t know how to respond to the new world of financial services.

The government lacks a clear, long-sighted vision without regulatory plans conducive to creating innovation. Fintech startups are too much inwardly focused so they don’t know how to play on a global scale.

“Despite the tremendous IT infrastructure and technological capabilities, the regulatory environment is not conducive to innovative fintech business models,” Jeffrey Jones, a lawyer at Kim & Chang, said.

Chance for Korea

If Korea produces appropriate regulations to help its players capitalize on its IT prowess, chances are that the country can emerge as the fintech capital of Asia, analysts say.

What is more important is that there are enough reasons Korea should fight to become Asia’s fintech leader.

First, it can be a new growth engine to inject new vigor into the sluggish economy, which is expected to grow below 3 percent in 2016, far below its potential.

Second, it can help solve youth unemployment by encouraging more college graduates to participate in innovative fintech businesses and work overseas in countries that are more globally connected.

Third, it can make our economy more agile to external changes by fostering more innovative small enterprises.

All told, becoming the regional fintech leader will provide an opportunity for Korea to not only regain its economic growth momentum but also raise its profile in the international community.

Experts say that it is urgent for Korea to define a clear vision to develop fintech models on a globally competitive scale.

Advanced Capital Partners Chairman James Rooney pointed out that Korea’s problem in fintech is that home-grown applications and solutions are disconnected from the standard practices, languages, operating systems, and protocols operating in the rest of the world.

“We are creating wonderful human talents who have absolutely no capacity to write software and provide solutions that can be used outside of Korea,” he said. “This makes Korea deeply uncompetitive.”