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| Financial Supervisory Service Governor Yoon Suk-heun shakes hands with KEB Hana Bank CEO Ji Sung-kyoo at The Korea Times' forum on digital transformation, held at the Plaza Hotel Seoul, Wednesday. / Korea Times photo by Shim Hyun-chul |
By Kim Bo-eun
The merging of finance and technology and the innovation it brings benefits players and consumers, but at the same time poses risks, the chief of the Financial Supervisory Service (FSS) said Wednesday.
"If we look on the bright side, fintech can bring about innovation that can greatly increase benefits for financial consumers and institutions," FSS Governor Yoon Suk-heun said at a forum on digital transformation hosted by The Korea Times in Seoul, June 26.
"But at the same time, it can cause a collapse by aggravating a crisis in the financial system and endangering the security of personal information," he said.
The governor said the interconnectedness, speed and the far-reaching effects of systems pose a risk.
As an example, Yoon cited if a robo-advisor recommends similar investment strategies to multiple clients, it may cause a concentration of investment in the recommended assets.
"The same is true for fintech. If fintech firms use similar algorithms, they may exacerbate herd behaviors among market participants at a fast rate," he said.
Cloud computing that connects firms through a network may also contribute to rapid transmission of one firm's problem to the others, he added.
In addition, the governor referred to how massive data that financial firms hold can be exploited.
He noted technology has developed to the extent that financial firms can now save massive data in a database, and that such a database has helped financial firms swiftly provide more tailored services to their customers.
"But such benefit has come with greater risk of information breach, and this time, in a massive scale," he said. "What makes the breach more serious is that the database contains biometric data that can stay compromised permanently, once leaked."
"The compromised biometrics may also put consumers more at risk of financial crimes as it allows easier access to unauthorized users to personal information," Yoon said.
Meanwhile, financial exclusion of the elderly and underprivileged was brought up as another key risk.
The governor cited a survey by the Bank of Korea that showed the chances of using mobile banking were lower as financial consumers were older and belonged to the lower-income group.
"This means that fintech development has made financial services more convenient for tech-savvy consumers, but ironically, more inaccessible and hence more inconvenient for those who are not familiar with technology," he said.
Yoon closed his speech by referring to the definition of "digital disruption."
"The term means disruptive innovation driven by digital technology. But when the word is translated into Korean, it becomes either digital innovation or digital collapse."
"This is because fintech carries both positive and negative connotations of innovation and collapse. The FSS will work to ensure that fintech leads to innovation," he said.
Regarding risks the governor mentioned, an official of an internet bank here said, "We have call center services that cater to the needs of the elderly, and we are paying attention to making our user experience friendly for them."
"We are also investing in preventing possible cases of hacking and will continue monitoring to prevent damage from occurring," he said.
A senior official of an internet-only insurer said, "Because the insurance industry has been conservative and slow to change, it will be the industry that undergoes the greatest disruption as it adopts insurtech."
"Side effects will inevitably arise but measures to mitigate them will develop at the same time," he said. "Insurers and authorities will create measures to beef up security."
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