Financial chiefs looking for clues in Silicon Valley

By Park Hyong-ki

The heads of local banking groups are increasingly looking abroad, especially at Silicon Valley in the United States, to find some “clues and hints” to realize and materialize their digital businesses, according to industry sources.

Currently, Shinhan Financial Group Chairman Cho Young-byoung and KB Financial Group Chairman Yoon Jong-kyoo are in the U.S. innovation hub, attending a startup forum hosted by the GIC, Singapore's sovereign wealth fund.

Under the theme, “Next Generation Financial Services,” the forum seeks to bridge Asian financial companies with Silicon Valley disruptors and innovators for potential partnerships, the GIC said.

This is where Cho and Yoon will meet with GIC executives, startups and venture capitalists to get a “glimpse” into the world of innovation and form a fresh perspective.

Given the limits they are facing in the domestic market amid an economic slowdown, tightened loan restrictions and a contracting housing market, local financial companies are left with no other options but to change the nature of their business, according to industry sources.

“Groups such as Shinhan and KB have become giants but don't know where to invest using their big pockets. That is why they are launching startup programs and searching Silicon Valley to find a breakthrough,” one source said.

In the digital space, whether blockchain, cloud computing or artificial intelligence, everyone, including tech companies, can be their main competitors.

Therefore, the banking groups can either join them or stand against them in a race that is bound to get more uncertain and competitive.

“Local financial companies can either join the tech community or stand against it. But history has always shown that alliances with common goals and a good cause have triumphed over a single entity or a tyrant in battles,” another source pointed out.

Woori Financial Group Chairman Sohn Tae-seung and NongHyup Financial Groug Kim Gwang-soo mentioned venture financing and the startup culture of Silicon Valley as potential models for new growth.

Even if the models do not provide clear answers to their problems, they can, at least, give the companies some guidance through trial and error by running their in-house startup incubators, he added.

During the launch of their innovation programs last week, Woori Chairman Sohn said the group will invest 130 billion won ($115 million) in fintech firms in their early stages, as Silicon Valley investors do. NongHyup Financial said its digital campus will become a tech hub equivalent to the scale of Silicon Valley.

“When investing in 10 startups and one manages to come out strong, then that one company will be worth a lot more than the nine that failed. This is the risk all companies need to take to transform,” a venture capital source said.