The Future of Fintech in South Korea
There is no doubt that the fintech industry has grown exponentially in recent years. Although some people remain suspicious of its services, fintech is definitely here to stay. Others even believe that fintech will do for the world what the internet did back in the late 90’s. Might be an overstatement, but doesn’t mean it can’t come true.
In China, the total domestic transaction value in the fintech market in 2018 comes to $1.6 trillion, with the number of users expected to amount to 1.5 billion by 2022. In the United States, that number is $1.3 trillion in 2018 and 290 million users by 2022.
Compared to the U.S. or China, South Korea’s fintech industry remains unusually small — with only $87 million in total transaction value in 2018 and 45 million users expected by 2022. However, despite this, South Korean fintech startups have shockingly snowballed in recent years, accounting for some 400 fintech companies.
Below is a list of reasons why South Korea has a bright future in fintech:
Free From Regulations
According to CB Insights, one of the reasons why 90% of fintech startups fail is because of regulatory restrictions. The Financial Services Commission (FSC), South Korea’s financial regulator, initially made marginal changes to help fintech startups foster innovation. The FSC’s exhaustive requirements prevented new competitors from entering the market and gave more power to the already established financial authorities.
But this all changed when FSC announced a new initiative to allow fintech startups to introduce new products and services without the need to comply with existing regulations. Under this policy, the FSC will determine if companies can be exempted from regulations. If their apps or services are deemed “innovative,” then they will be free from regulations for up to two years.
Startup Funding in Korea
On October 2016, the South Korean government announced a pledge of 3 trillion won (around $2.7 billion) to support fintech startups financially. On top of that, big corporations like Samsung and Naver are actively investing in local startups. Yearly funding estimates to about $500 to $600 million per year.
Korean Startup Community
South Korea currently hosts over 50 co-working spaces. That means building networks and developing partnerships are easily available for most startups. The government also implements programs to promote collaboration between domestic and foreign startups. Below is a list of few accelerator programs available for startups in Seoul:
- The K-Startup Grand Challenge is an accelerator program that connects overseas startups with local venture capital firms and corporate companies. Last year, more than 1,500 firms from 118 countries competed to be part of the program.
- The Startup Grind Seoul, which consists of over 1,600 members, hold events and meetups each month to network, learn, and provide support.
- The Startup Festival is organized by the Ministry of SMEs and the Korea Foundation for the Advancement of Science and Creativity, to help bring in global startups, investors, and media into South Korea.
South Korean Banks Are Relying More on Fintech
South Korea once held the highest internet penetration rate in Asia. With more than 43 million internet users, banks have taken a huge step towards building a strong digital financial infrastructure. Major players such as Shinhan, Woori, KEB Hana, and KB Kookmin are incorporating blockchain technology into their financial services nearly every week.
Few fintech startups to watch for in South Korea:
- QARAsoft (KOSHO) — QARAsoft operates KOSHO, which is a Robo-Advisor app that utilizes a deep learning technology to offer financial solutions for individual investors. The app predicts the stock, financial, and cryptocurrency markets and provides users with investing recommendations.
- Viva Republica (Toss) — Viva Republica is the most disruptive fintech startup in South Korea, with its app Toss ranking №35 globally on KPMG’s Top 100 Fintech Companies in 2017. Started out as a simple P2P payments platform, Toss has expanded to other financial products and has become one of Asia’s fastest growing financial services companies in 2017.
- Aizen — Aizen uses Big Data analysis to provide a model that helps businesses make better decisions in a fast and efficient manner. The company utilizes machine learning, machine reasoning, deep learning, and predictive modeling to provide financial solutions.
- Rainist (Bank Salad) — Rainist operates Bank Salad, which is an app that provides various financial solutions tailored to an individual. Its database is composed of over 4,200 financial products and the service is now being used by millions of customers.
As innovation continues to boom in South Korea, fintech startups are on their feet and ready to work. And with the market becoming more competitive and demanding, South Korea sure seems to have a bright future in the fintech industry.