[Square] Let's Face the Problems of Big Tech Hidden Behind Fintech

Handong Hwan, Head of KB Management Research Institute

There is a question that banks in Korea hear more often than anywhere else: "How will Korean banks respond to the entry of big tech into the financial industry?" It is true that companies like Google, Amazon, and Apple have shown interest in finance. However, none have penetrated as deeply into the core financial sector as Korean big tech companies have. The incident where Amazon threatened to exclude Visa cards from its payment network is less about Amazon's intention to enter credit card or payment businesses and more akin to Korea's Costco designating an exclusive card for use in its stores.

Most of the creative digital financial services by fintechs are technological innovations developed by fintechs specialized in finance. Even Revolut, a British fintech famous for being introduced as a digital innovation case by the Financial Services Commission, was founded by financial experts who had worked at investment banks. The majority of fintechs that have achieved digital financial innovation?such as PayPal, Klarna, Monzo, N26, and Nubank?originated from startups specializing in finance. Except for China, which is governed by the Communist Party, no other country has big tech companies growing explosively under the guise of fintech startups as seen in Korea.

Here, "big tech" does not simply mean large fintech companies but refers to digital gatekeepers who control the gateways essential for entering the digital world. For convenience, these digital gatekeepers are called big tech. Big tech companies that dominate over 70% of portals, 90% of messengers, and more than 60% of search engines?national platforms used by the entire population?already possess influence comparable to that of mega-conglomerates. While global big tech firms are engaged in high-stakes battles in core tech areas such as cloud computing, artificial intelligence (AI), future automobiles, and spacecraft development, Korean big tech appears to focus solely on rapidly monetizing assets through finance. An example is the case where shares were sold in large quantities immediately after listing, legally flawless but betraying trust.

The United States and Europe perceive the excessively large big tech companies as threats to free and open societies and are planning various regulations. There is great hope in the new government's intention to boldly remove outdated and excessive regulations that do not fit the digital era to innovate finance. However, if big tech companies monopolizing the digital world are not properly distinguished from fintechs that need support, the mistakes of the past five years will be repeated, where a few big tech firms reap all the benefits of government regulatory reforms and digital innovation.

Although the "level playing field" theory advocating equal regulation for equal functions has emerged belatedly, advanced financial countries including Europe and the United States have gone further by regarding big tech as entities that should not even enter the playing field (finance). This is because these forces, which do not compete on the quality of products and services but block creativity and innovation by controlling access to the digital world, appear more bank-like than banks and more card company-like than card companies on the surface, yet remain in regulatory blind spots and foster shadow banking, ultimately causing harm to the national economy including finance.

If big tech monopolizes digital infrastructure, dominates media, shopping, and advertising, controls finance, and holds data on the entire population, we must not make the mistake of creating the ultimate Big Brother against an open society ourselves.

Han Dong-hwan, Director of KB Management Research Institute