코인스택 고객센터

코인스택에 관련된 소식, 그리고 기술적으로 궁금한 것들을 검색하고 공유 하세요


Korean fintech: Financial times [2017.08.31]


Korea’s financial technology sector is affording start-ups disruption opportunities based on an outdated infrastructure environment. Early movers are experimenting with a number of business models

The first half of 2017 has seen significant traction in Korea’s financial technology space, especially in the case of Kakao Corp. In the space of a few months, the country’s most pervasive internet company has launched fintech partnerships with Alibaba Group and Korea Investment Holdings (KIH) that are set to reshape the industry.

In February, Alibaba affiliate Ant Financial committed $200 million to a money transfer joint venture project with Kakao that has been growing at around 100% a month since April and recently hit KRW100 billion ($90 million) in transactions. The service, known as Kakao Pay, combines Ant’s Alipay payment platform, with 34,000 merchants and a strong offline presence, with the Kakao Talk instant messenger service, which is estimated to be used by some 90% of Korea’s smart phone users.

Remarkably, this is not Kakao’s biggest fintech coup of the year. In April the company alongside KIH won government approval to open the country’s second internet-only bank, Kakao Bank, which claims to offer mobile deposit, lending and foreign exchange services at a 36% discount to the fees charged by commercial banks due to a lack of costs related to physical branch offices. 

“The big thing for Korea is that the internet-only banks have launched, and Kakao Bank is getting amazing numbers, so I think the government is going to be granting more licenses,” says Buster Suh, a communications professional at Kakao with seven years’ experience working for banks in the country. “Any businesses related to that would probably be excellent plays for venture capital firms.”

There are a number of common themes behind these deals, including a softening regulatory picture, increased interest from conglomerates in disruptive technologies and a dense, internet-savvy consumer market characterized by rapid product uptake. But for GPs investing in the wake of such activity, the opportunity appears to boil down to a more fundamental equation: now that Koreans have a taste for a better banking environment, they’re going to want more. 

Out with the old

Korea’s first online-only bank, K Bank, was launched about three months before Kakao Bank by KT Corporation, formerly Korea Telecom. The sudden emergence of this space is interpreted as part of a government effort to cost-effectively replace outdated national financial services infrastructure by stoking competition and innovation among new players.

The overhaul will need to balance some unique polarizations in local financial services. Korea benefits from some of the highest rankings globally in internet use and broadband speed as well as close to 90% smart phone penetration. However, it is also routinely dismissed as having the most cumbersome regulatory environment for banking in the developed world. 

In most developed economies, banks with digital services have gradually met hacking challenges by implementing stiffer security protocols on the operational back-end – thereby providing consumers with a relatively hassle-free interface. In Korea, the situation has evolved in reverse, with online transactions typically requiring dozens of clicks, password checks, text confirmations and a raft of software downloads.

VCs describe this scenario as a consumer pain point ripe for start-up disruption, especially given the slowness to react by traditional banks and credit card companies. According to the Korean Fintech Industry Association, investment in fintech companies nationwide increased 360% during 2015 to $35.5 million and amounted to $50 million by mid-2016.

This trajectory is expected to maintain a parabolic shape as international heavyweights begin participating in larger domestic deals such as the $200 million Alibaba-Kakao tie-up and a $48 million round for payments player Viva Republica that attracted US giant PayPal. Korea is now estimated to host about 370 fintech companies, employing around 25,600 people.

Due to some regulatory complications around banking by PC, one of the keys areas of focus for these companies has been mobile. Although the rules are being revised, PC banking currently requires the use of Internet Explorer as a browser and Microsoft’s ActiveX software – both of which are considered archaic tools in fintech circles. Kakao Bank, for example, is tackling the issue with services exclusively usable on mobile, which is regulated by fewer security hurdles.

Other players, meanwhile, are addressing PC banking architecture through emerging cross-sector technologies. Blocko, a start-up backed by the likes of Samsung Venture Investment and Intervest, is commercializing blockchain use-cases with a number of banks as well as more diversified industrial clients such as Hyundai.

“Infrastructure is a problem that works to blockchain’s benefit in Korea, because blockchain can replace very complicated and expensive monolithic legacy systems,” says Allan Kim, founder of Blocko. “And that’s not only true in the financial services area. We’ve realized that there are a lot more commercialization use-cases in helping organizations solve problems around existing solutions such as EDI [electronic data interchange], ERP [enterprise resource planning] and SCM [supply chain management].”

The role of blockchain in the digitization of Korean financial services also highlights the early-stage nature of the government’s policy overhaul. Although the Financial Services Commission (FSC) recognizes cryptocurrency as only one potential blockchain application, current regulations still tend to lump the two together, complicating good intentions around streamlining security issues.   

Regulatory reforms

Non-bank money transfers have only been legal in Korea since 2015, when a raft of new banking laws helped set up the ongoing fintech boom. The same year, financial institutions were given more control over their authentication programs.

The FSC has also eased rules for crowdfunding, established a fintech support center and backed KRW200 billion in loans to the start-up ecosystem. It also expanded the opportunity for card companies to use big data studies and issue no-plastic mobile cards. Last year, the government announced plans to allow capital raised through public markets to invest in domestic private equity vehicles – a move said to be squarely targeted at bolstering fintech.

The to-do list, meanwhile, appears feasible, even if its rollout could be protracted. The government will be encouraged to ramp up licensing for online banks and axe the public key certificate for PC transactions. Also, players in the payment space will seek an increase to the money transfer cap of about $2,000 per transaction. 

“Korean regulations have been very well organized and well structured, but the world is changing quickly and you need to move fast in order to survive in a fintech environment,” says Yoonho Shin, a managing director at Intervest. “Now, P2P lending, internet banking and overseas money transfers are awakening the major banks. They’re starting to move, and they never did that before.”

The legitimacy established by the cooperation of traditional financial institutions will be essential to realizing new fintech regulations, especially given the relevant legal committees’ reputations for being conservative around security and fraud issues. But cooperation between major banks and start-ups is indeed gathering pace as consumers experiencing streamlined online banking for the first time put more pressure on the industry’s old guard to catch up.

P2P lending has emerged as the fastest growing segment, including credit scoring services and more convenient crowfunding platforms. 8percent, a local start-up in this space backed by DSC Investment, SBI Investment Korea and Capstone Partners, attracted $8.6 million in funding last year from payments services company KG Inicis.

Other areas heating up include loan brokerage services, which typically offer an online database that eliminates the need to go from branch to branch comparing interest rates and terms. Wealth management, advisory and insurance services are said to be more attuned to face-to-face business models, but examples of digitization are being seen in Korea. Kakao says a couple of major insurance companies have adopted its new mobile authentication service.

“As a start-up, you need to focus on certain areas so you can build your advantages and expand into new areas,” says Intervest’s Shin. “Blocko is very niche, but they’re in a strong position with financial institutions and large conglomerates, so they can extend their business into other areas. I think that’s the right move.”

Retail payments remains the largest area, with major participants including Samsung and local internet giant Naver. However, fragmentation has created competition so intense that even a contract with the country’s biggest e-commerce company will only generate revenues in the disappointing range of $50,000 a month.

Viva Republic has responded to this challenge by introducing 12 services outside of payments since its launch in 2015. The company, which counts several VCs as backers including Altos Ventures, Goodwater Capital and Qualcomm Ventures, expects the strategy to help it break even in 2018.

“Because money transfer is by nature a very high cash burning business with a lot of fees to banks, we’re bringing on other financial services to offset that cost,” says Jin Oh, head of investor relations at Viva Republica. “There are so many things to do here in Korea and so many opportunities left that are just waiting to be disrupted – we’re just getting started on that.”

One of the peculiarities of Korea’s payments space is that its fragmentation does not create much opportunity for consolidation. This is sometimes attributed to the notion that many of the most likely consolidators are following corporate visions distinct from financial services. Samsung, Kakao and Naver, for example, operate primarily in non-finance fields and appear uninterested in dominating a space that has proven to generate only slim profit margins.

Meanwhile, diversification plans can be stymied by Korea’s limited fintech talent pool. As a result, internationalization, in both funding and operations, has become a common theme in company roadmaps across payments, high-tech security and other financial services. 

The international angle

Viva Republica, Blocko and Kakao have all expressed interest in foreign expansions, with Viva beginning to make noises about potential acquisitions in Southeast Asia, where a lack of competitors and rapid mobile uptake are seen as an enticing combination. Although, the company said an overseas push was not necessary for its continued success, it has emphasized significant potential in bolt-ons and licensing out technology.

Most such plans remain on the blackboard, however, as start-ups monitor the progress of Naver, the first Korean player to take a large fintech business overseas. Naver’s Tokyo-based subsidiary Line has done well in Japan, Thailand and Taiwan, but a fledgling payments operation in Indonesia is said to be overly reliant on a partnership with local lender Bank Mandiri.  

Naver’s Indonesia plan also illustrates the country-by-country nature of the export opportunity for Korean fintech. Line saw a local bottleneck in which half of money transfers were handled by human networking – a different pain point than in the developed markets back home but still addressable with company knowhow.

Along with the show of confidence made by major foreign investors so far, Indonesian success for Naver could fortify perceptions about Korean fintech’s export marketability. But Young Suk Kim, the digital lead at EY Korea who worked on Line’s Indonesia expansion and the Kakao Bank launch, sees an uphill road for the country’s independent entrepreneurs due to the relative strength of a growing domestic online-only banking industry.  

“The internet banks in Japan are still struggling to grow their market position because the local customers are still too loyal to the traditional banks,” he says. “But in Korea, Kakao Bank is acquiring around three million customers a month who are using it as a secondary bank for disruptive services. That’s a unique phenomenon in Korea that might make it difficult for fintech start-ups in the country to succeed.”


기사 전문 보기[Korean fintech: Financial times - AVCJ]


도움이 되었습니까?
0명 중 0명이 도움이 되었다고 했습니다.


Zendesk 제공