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| Kakao CEO Yeo Min-soo, right, and Yoo Bong-seok, head of Naver's media platform center, sit side by side as witnesses during an audit run by the National Assembly's Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee at the Assembly on Yeouido, Seoul, Wednesday. Yonhap |
By Yi Whan-woo
Big tech companies are expected to be largely unaffected by the National Assembly's audit on the banking industry, as the lawmakers did not manage to adequately address the firms' dominance over the mobile banking market, according to market observers.
Mobile banking giants Kakao and Naver were scrutinized by lawmakers during the three-week-long audit ending Thursday, for their sprawling expansion into over 100 different businesses by capitalizing on their dominant customer base.
Accordingly, Kakao and Naver executives were summoned as witnesses in multiple hearings run by different Assembly committees.
"I am not sure whether the members of those committees pinpointed issues on fair trade, antitrust and joint prosperity regarding the banking business," said Shin Yul, a political science professor at Myongji University.
He assessed that the Assembly's scrutiny on Kakao and Naver was heavily focused on non-financial sectors dominated by small- and medium-sized enterprises (SMEs), such as cab-hailing services and beauty shops.
Before the audit, calls had been growing within the financial industry for measures to be taken to curb Kakao and Naver, which have been luring customers away from major commercial banks while avoiding relevant responsibilities.
Using their high-tech infrastructure, the companies have been introducing one-click payment, money lending, deposit and other electronic services and commercial banks have been struggling to catch up.
Their business expansions were also made possible as the platform operators have already secured potential customers, who are subscribers to chatting and other free smartphone apps.
With no revised law to address the major changes affecting the banking industry, the platform operators have so far been exempt from regulations on banks. This was another plus for them to stay ahead in the competition with traditional lenders.
"The commercial banks appear to have received less attention than SMEs and self-employed people, because the banks are making profits," an industry source said, noting the major lenders are anticipated to enjoy hefty profits in the third quarter. "The very survival of banks, however, will be under threat if the government and Assembly do not take preemptive steps to cope with changing banking trends."
In a report released early this month, SK Securities projected the platform operators to expand their banking businesses through two ways ― formally acquiring a banking license or partnering with a financial services firm.
In particular, the competition between the platform operators and commercial banks will only intensify in the payment market.
This is because online payments are the largest and fastest-growing category in the fintech industry, along with data analysis, blockchain, digital wallet, software development and asset management.
Citing data from McKinsey and Company, SK Securities said the global electronic payment market was scaled at $2 trillion in 2019.
The brokerage house said ecommerce will contribute to growing demand for electronic payments, noting that the online shopping market saw an annual average growth of 18 percent from 2015 to 2019.
"The pandemic is making the ecommerce market grow even faster than expected," it said. "The platform operators may adjust their speed and shift direction in the banking business, but giving it up will not be in their scenario."
