, Korea

South Korean banks stay ahead despite digital surge: report

Fintech companies will stay focused on money transfers and other simple transaction services.

South Korean banks have taken advantage of the high internet and smartphone rates in the country to remain ahead of non-banking and fintech competitors amidst a digital revolution in the sector, according to an S&P Global report.

Whilst, internet-only banks or fintech companies can put modest pressure on their grip as a regulatory sandbox launched in Q2 2019 waives regulations in offering new services, their functions remain limited compared to banks. In particular, the latter stay focused on money transfers and other simple transaction-based services.

Further, nonfinancial companies cannot fully own internet-banks despite Korea easing regulations this year. New applicants must pass through a stringent process, the report noted, and regulators already rejected two applications this year.

Nonetheless, more licences are expected to be awarded over the next few years, with plans for three applications in October likely to be announced at the end of the year.

Open-banking initiatives offer both opportunity and challenge for bank incumbents as it allows transparency for customers across multiple platforms. Data aggregation will also increase price transparency, leading to higher competition to keep customers.

Photo courtesy of Pexels.com.

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