Naver to outmatch Kakao in data-driven financial business

By Lee Kyung-min

Naver Financial CEo Choi In-hyuk Korea Times file

Naver Financial will be able to gain the upper hand over rival Kakao Pay in data-driven financial services after it was granted a license to run “MyData,” defined as easy, fast and comprehensive viewing of and access to financial services.

The Financial Services Commission (FSC) recently announced that requests filed by the Naver subsidiary along with 27 other applicants seeking to become MyData operators were all approved, allowing them to begin operating the new service starting Feb. 5.

The final go-ahead clears the way for the financial subsidiary of Korea's largest portal to attract a greater number of customers than the subsidiary of Kakao Corp., which has yet to clear a slew of eligibility issues.

My Data is a key policy initiative led by the FSC to foster innovation in the financial market. According to the Ministry of Science and ICT, the size of the domestic data industry market grew to over 19.2 trillion won ($17.3 billion) in 2020, up 14 percent from 16.8 trillion won in 2019. The data sales and delivery services industry take up nearly half, or 9.3 trillion won.

Operators will be able to offer tailored financial services by managing personal credit data collected from banks, insurers and credit card companies. The providers of the service can use the data to recommend products that best fit customers' needs, while clients can compare a variety of services with differing terms and conditions.

Kakao Pay CEO Ryu Young-joon Korea Times file

At issue was whether financial authorities would recognize assurances by Naver Financial's second-largest shareholder, Mirae Asset Daewoo, which pledged not to exercise control.

The brokerage under prosecution investigation on allegations of violating foreign exchange transaction laws submitted the pledge in writing shortly before the FSC review.

The much-rushed move followed an earlier one where the brokerage abruptly changed Naver Financial's ordinary shares to convertible preferred shares, thereby lowering the proportion of its voting shares from 17.66 percent to 9.5 percent.

The last-minute effort was to qualify for the license review, given an applicant's major shareholders with over 10 percent of voting shares are judged based on a “large shareholder criteria.” Under the stricter rule, requests for review will be denied if the applicant's major shareholders are under criminal investigation or subject to sanctions from financial authorities.

Among 28 firms cleared for the MyData business are KB Kookmin, NongHyup, Shinhan and Woori banks as well as Viva Republica, the operator of mobile money transfer app Toss. The license was granted after the FSC conducted an on-site inspection and review of their business plans.

Meanwhile, Kakao Pay is expected to face complaints from customers starting Feb. 5 when it can no longer provide services similar to those offered by MyData operators.

Other firms that offered similar services have informed consumers about service terminations. Those ineligible to seek the license due to the major shareholder requirements include Hana Bank, Hana Financial Investment, Hana Card and Samsung Card.

The FSC will announce guidelines for My Data operators by the end of February to outline the method of membership subscription and scope of information provided through the new service. Also included are safe data transmission methods and consumer protection measures.