Book details how Korea can lead fintech industry

Author calls for deregulation on banking sector

By Park Jin-hai

Lee Suk-geun

“Fintech Revolution; A Game Changer for the Financial Industry” by Lee Suk-geun

Lee Suk-geun, an endowment professor at Sogang University and former presidential economic adviser, has released a book that details Korea’s place in the fast-evolving financial technology (fintech) industry and how it can lead the sector.

In the 193-page book, “Fintech Revolution; A Game Changer for the Financial Industry,” the financial expert, who has worked at various global consulting firms and most recently consulted for financial IT infrastructure firm Telco Systems, and the government in formulating a fintech strategy, warns that the Korean financial industry is facing real and serious challenges stemming from heavy and obsolete government regulations _ some dating to 55 years ago.

“Compared with Korea’s strong IT infrastructure, the competitiveness of Korean banks ranked below 50 for years,” Lee said during an interview with The Korea Times, citing Bankers and World Economic Forum data. “Old and dysfunctional regulations limit the financial industry. But, more importantly, the financial industry, which was slow to catch up with global trends because of a lack of effort to renovate and restructure the industry, can wreak havoc on the overall economy, considering the financial industry is a vein to the whole economy.”

In order for the country to become a fintech powerhouse, the book suggests that a roadmap and vision for the fintech industry should be led by the ICT sector, not by the government.

“Smartphone banking is the way to go and this is something Korea can do well at as long as regulation allows Telco and other IT firms to enter the financial industry to reform it,” he said. “That can encourage fintech startups to develop creative financial technology to renovate financial institutions and to provide cheaper and better services for customers.”

Regarding K bank, which was founded by local telecom operator KT and started services early this month as the country’s first internet-only bank _ eight years after the initial idea was conceived _ Lee said it will instigate competition in the financial industry and lower service fees for customers.

“Within three weeks of its launch, K bank’s deposits reached $250 million and the number of customers exceeded 240,000. No existing banks have ever achieved such a record, and this is an encouraging sign that can make the Financial Services Commission consider the approval of at least two other internet banks, including Kakao bank,” Lee said. “This will fuel competition in the financial industry and lower service fees for customers.”

To make this happen, he said there are issues to be resolved. Under the current Banking Act, no non-financial business operators are allowed to have 4 percent or more of the stocks of a bank to prevent its control over it.

“KT can only have 4 percent of K-bank consortiums, which include Woori bank, GS retails and so on. This regulation will negatively affect further investment by KT on K bank and will impede the growth of internet banks.”