Financial companies in Korea waging war over 'big data' dominance

Gettyimagesbank

By Anna J. Park

As the post-pandemic economy moves faster towards full-on digitization, major financial groups in Korea are mired in a silent war over dominance in the financial data business.

It's obvious that the global pandemic has accelerated the financial sector's digital initiatives as social distancing and contactless trends have become the new norm. Yet the nation's financial industry had long been bracing itself for the development of the data sector even before the impact of COVID-19.

MyData business plan

Back in summer of 2018, the Korean government announced its plan to foster and expand the country's data industry by 2022. One key state-led pilot program, called the “MyData” project, allowed people to have the right to “data portability” ― the public's strengthened control over the right to compile their own information on web sites.

Under the plan, financial institutions are obliged to provide customers' personal information to a third party approved by the government as a MyData business operator, which would then provide a comprehensive set of financial information back to the customer, whenever they decided to browse their own information at one easy glance on a site or on a mobile app.

Until recently, personal financial information had been exclusively left in the hands of each financial institute, making it almost impossible for such data to be conveniently gathered and viewed together.

According to the Financial Supervisory Commission earlier this month, 116 companies, including 55 financial firms, 20 fintech firms, and non-financial companies, expressed intent to apply for the MyData business, during a preliminary survey conducted from May 16 to 28 to figure out the number of potential companies interested in the new realm of business. The financial authority is slated to announce more details about the MyData project sometime in the next month.

Data bills passing parliament

This new finance business model based on data has become possible as the National Assembly passed “three data bills” in early January this year ― three long-pending revisions on the Personal Information Protection Act, Information and Communications Network Act and Protection of Credit Information Act ― aiming to ease regulations on the use of big data encompassing personal information for businesses.

Against this backdrop, it is a natural consequence that each major financial group in Korea has focused on strategic plans to advance into the data market to reap the most out of it.

As market analysts point out, data is not something as depreciable as other tangible goods; rather its value increases more and more, when other pieces of data are added. That's why financial firms are hurriedly seeking to glean as much as they can while developing new profit models using such data.

Dominating data business

Even prior to the passage of the three data bills, Shinhan Financial Group Chairman Cho Yong-byoung had ordered the launch of a taskforce on new data businesses in January this year. With the team in full swing, digital department employees from each of the group's affiliated firms have joined to draw up timely data strategies for the group.

In April, the group's flagship Shinhan Bank became the first domestic bank to start a data sales business. The financial group has also recently joined hands with mobile carriers such as SK Telecom and LG Uplus in business projects to mutually enhance their capabilities in big data and AI.

KB Financial group has set “digitization” as the foremost goal and focus of the group. In early April, Chairman Yoon Jong-kyoo urged the financial group to digitize the entire work process, way beyond just a partial digitization of online or mobile channels. Yoon also asked employees to get familiar with the latest capabilities. The financial group is also cooperating with LG Uplus in operating various digital-based business models.

Hana Financial Group Chairman Kim Jung-tai also asked the group to strengthen its digital prowess, while its research center analyzed global banks' digital strategies. Based on such research results, the financial group is expanding customized counseling and other services for users based on big data analysis.

The financial group has also recently set up a so-called DT University, an education platform both online and offline to strengthen the group's digital capabilities, especially the power of digital transformation.

Woori Financial Group announced the key slogan, “Digital for Better Life” in early May. The group's digital innovation committee is led by group Chairman Son Tae-seung and Woori Bank CEO Kwon Kwang-seok, aiming to lead big data innovation efficiently and effectively through top-down leadership. Son is also known to have met CEO Koo Hyun-mo, head of KT Corporation, to discuss AI and big data to expand the group's horizons.

NongHyup Financial Group has also long been focused on the digitization of its affiliated firms. The group has recently signed an MOU with financial startup Rainist, which operates popular mobile app BankSalad, to jointly foster and activate financial data business.

Threats from IT firms

Market observers say the financial groups' accelerated moves towards digitization and data-oriented businesses is also being triggered by the rapid growth of major online platforms Naver and Kakao. The two internet-based firms are transforming themselves into financial powerhouses.

Naver and Kakao have about 12 milllion and 20 million users, respectively. Their growth potential as financial groups is high; Naver is slated to launch its own investment, insurance and savings products later this year, while Kakao Pay's transactional amount increased to 48.4 trillion won in 2019, up 140 percent from the previous year. This year's transactional amount is expected to exceed 75 trillion won.

Against this backdrop, moves towards digitization and data business will be intensified and accelerated as traditional financial groups and new IT powerhouses compete for dominance in the newly expanded market.

“It is expected that Naver and Kakao, Korea's two most iconic online platform operators, will grow into leaders in MyData business. Using their own financial arms, Naver Financial and Kakao Pay, the two firms are estimated to possess a competitive edge as a comprehensive financial platform company,“ analyst Kim So-hye at Hanwha Investment & Securities wrote in a recent research paper.