South Korea’s banking industry is embracing digital transformation with 65.7% of the country’s financial institutions pursuing various business projects in regard to digitalization.
These firms have committed a combined 584.5 billion won (US$492.7 million) this year towards such projects, according to the Financial Supervisory Service (FSS).
A research conducted by the financial watchdog found that 38 of the digital projects currently being undertaken by South Korea’s financial services companies are dedicated to artificial intelligence (AI) services and adoption, 37 projects are dedicated to internal process automation, including robotic process automation, and 26 focuses on big data platform development and optimization.
63 out of South Korea’s 108 (58.3%) banking and finance companies have established departments specializing in digital operations. More than half of the country’s financial institutions (59.3%) are either planning to run specialized digital training programs to educate employees or choosing to recruit experts from the outside.
Though South Korean banks’ digitalization push promises to lead to greater efficiency and better customer experience, the FSS notes that the trend raises cybersecurity concerns and said it plans to take steps to self-enforce IT security governance measures as well as carry out security audits.
The financial regulator also said it will strengthen its monitoring of large IT systems and the risks from technology outsourcing companies providing services such as cloud computing.
The FSS research findings on South Korean banks’ digital ambitions come at a time when the country is looking to become a leading fintech hub.
Earlier this month, the government announced its intention to turn Seoul into a “fintech test bed,” citing fintech as one of its top priorities among finance policies.
At Korea Fintech Week 2019, Choi Jong-ku, chairman of the Financial Services Commission (FSC), said:
“We will make efforts so that Korea’s regulatory sandbox can serve as a test bed for global fintech businesses. Fintech is the future of finance, which challenges the monopoly and oligopoly of the existing finance sector and promotes opening and competition.”
Choi said that regulation was currently the biggest hurdle to the local fintech industry’s competitiveness and committed to improving the legal framework.
South Korea launched its regulatory sandbox earlier this year and announced in April and May the fintech solutions and companies constituting its first batch.
To help local fintech startups get the financial resources they need to grow, the FSC plans to create a platform for fintech investment which would connect fintech companies with venture capital firms.
The regulator aims to create investment funds totaling 100 billion won (US$83.6 million).
At the event, Yoo Kwang-yeol, first deputy governor at the FSC, said that the government will encourage and help South Korean fintech companies to enter Southeast Asian markets.
“There is a great possibility for fintech development in the Southeast Asian region,” Yoo said. “Startups should enter markets there for new business and make this a new engine of growth.”
The inaugural Korea Fintech Week took place last week in Seoul. The event, organized by the FSS, FSC and Fintech Center Korea, brought together 2,500 attendees and more than 50 local fintech companies including mobile payment platform Kakao Pay, personal finance management app Banksalad and mobile payment platform Toss, to discuss fintech developments, policies, but also insurtech, among key topics, and explore new business and investment opportunities.
Besides the South Korean government’s pledge to support the domestic fintech industry, the event also saw the signing of a memorandum of understanding between the FSS and Deloitte to assist South Korean startups entering foreign markets.
