Since its first electronic inter-bank transaction in 2001, South Korea has observed a fast-paced financial technology evolution, coupled with high mobile and internet penetration and the latest deregulation measures.
A recent conference by IFC -- a sister organization of the World Bank and member of the World Bank Group -- shed light on the degree of Korea’s fintech startup evolution and its potential to make ripples in the unbanked Asian emerging markets.
Panelists IFC's Asia & Pacific FIG Regional Industry Director Rosy Khanna (from left), L&T Financial Services Chief Executive of Rural Finance Sunil Prabhune, HDBank's head of eBanking Bui Thanh Tu and Finda CEO Lee Hye-min, speak at IFC Innovation Day on Nov. 11 at D. Camp.
Titled ‘Connecting Korean Fintechs with Asia,’ held Nov. 11 at Seoul-based startup accelerator D. Camp, the event brought together fintech experts at home and abroad, entrepreneurs and thought leaders from financial institutions, think tanks and government agencies.
It focused on the current state of fintech in Korea, insights on connecting domestic firms with peers in Asia and discussed ways to catalyze cross-border opportunities in the region.
Below are the key takeaways from the latest IFC Innovation Day.
Early adopters behind motivation
Spearheaded by neobanks -- commercial lenders without brick-and-mortar branches – Korea’s fintech landscape is segmented into areas led by startups dedicated to e-payments, money transfers, peer-to-peer lending for midrange loans, wealth management and insurtech. Major banking groups are seen quickly moving in sync with the trend.
What is boosting their potential so far is tech-savvy consumers, according to Kim Sei-ho, director at KPMG.
“There are many early-adopters in Korea so people are not afraid of using new technologies and utilize the convenient services,” Kim said. “More customers want to use mobile devices to use financial services and products.”
The early adopters began to recognize that their problems were being solved easily.
For example, before technologies related to wealth management came into being, the service was exclusively for high-net-worth-individuals. But now, plenty of assets are not necessarily a prerequisite for Koreans -- especially young people -- to enjoy personalized wealth management services through mobile apps.
Also in the past, the insurance market was increasingly becoming more consumer-oriented thanks to technologies, shaking the supplier-oriented market where sellers often designed the products and forced customers to buy them.
Spike in global fintech demand
The concept of financial inclusion is important in Asia’s most populous countries.
Nearly four out of 10 unbanked population came just from five Asian countries -- China, India, Indonesia, Pakistan, Bangladesh, according to the Global Findex Database 2017. Parts of Asia’s emerging market have seen stagnation or gender gap in account ownership.
In the meantime, about two-thirds of unbanked adults -- or 1.1 billion people -- own a mobile phone. In India, more than 50 percent of the unbanked have a mobile phone, while in China 82 percent do.
Now that simply having a mobile phone can potentially open the doors to money transfer and other financial services, chances abound in Asian emerging market for fintech services -- either by startups or financial institutions.
“Financial inclusion is on the rise globally,” said Choi You-jin, financial sector specialist at World Bank Group FCI. “Fintech firms can capitalize on the opportunities.”
For fintech services in Korea to tap into such spike in demand, understanding and overcoming the discrepancy between domestic and target market is key, another speaker said.
“Here (in Korea), the discussion is more about quality like how can you add quality, which is very different from the rest of the world,” said Sameer Goyal, program manager for Seoul Center for Financial Sector Development at World Bank Group FCI.
“We are looking at underserved ones, or those who were not served before. The progress for those kind of growth is quite different. And I think Korean firms would have chances to take.”
Such global demand for fintech bodes well for Korean startups, which will eventually find it inevitable to go overseas, given the size of the domestic market.
“If you look at Korea as a market, it’s not as big, so Korean fintech startups might not be able to scale up,” said Lee Han-saem, deputy director of Financial Innovation Division at the Financial Services Commission.
Under the pretext of financial innovation, financial authorities here hves set up a fund worth 300 billion won ($258 million) dedicated to investments in fintech, urged Korean banking institutions to nurture startups with in-house accelerators, offer support for their listing, and provided support to venture investors and accelerators.
Kim of KPMG argued more active investment in Korean fintech startups are necessary to make inroads overseas, saying they are “undervalued.”
By Son Ji-hyoung (email@example.com)