[The Editors' Verdict] Competition Between Big Tech and Financial Companies

Kakao and Naver, operators of the national messenger KakaoTalk and the national portal Naver, are accelerating their entry into the financial industry. Kakao, which already owns the internet-only bank KakaoBank, first entered the payment market through its subsidiary KakaoPay, and then acquired Baro Investment & Securities in February, renaming it KakaoPay Securities to enter the securities business. Naver has also entered the financial industry through its subsidiary Naver Financial. Foreign countries are far ahead of us. Global platforms such as Google and Amazon are entering the financial market based on brand awareness, massive customer data, and advanced ICT.

Such giant IT companies based on internet platforms are called Big Tech. While FinTech (Financial Technology) mainly provides financial services equipped with digital technology, Big Tech is characterized by making big data the core of their business and directly providing financial services. From now on, fierce competition is expected not only within the vertical barriers of financial sectors such as banks, securities, and insurance, but also between financial companies and Big Tech.

Korea’s financial authorities are leading the entry of non-financial institutions including Big Tech into the financial industry through the opening and innovation of the existing financial system, ahead of regulatory agencies in any other country. First, open banking was introduced at the end of last year. This allows banks to disclose payment functions and customer data they hold to banks and fintech companies via open APIs. Next are the My Data business and data portability, which will be implemented under the amended Credit Information Act.

My Data allows consumers to actively integrate, manage, and utilize their personal information scattered across multiple institutions. Under the amended Credit Information Act, the business of providing integrated credit information of the credit information subject to themselves in a certain way is called “Personal Credit Information Management Business.”

Data portability allows individuals to directly transfer their personal information held by financial institutions to third-party companies to receive new services. Ultimately, the My Data business supports integrated management of personal credit information using data portability as a means, enabling the provision of personal credit and asset management services through analysis of consumption patterns.

Finally, there is My Payment and comprehensive payment and settlement business introduced in the Electronic Financial Transactions Act. My Payment is a business that issues payment orders to financial institutions without holding customer funds, allowing payment and remittance from all banks’ own accounts with a single login. The comprehensive payment and settlement business independently issues and manages accounts without partnering with banks and enables payment and settlement through these accounts.

Thus, Big Tech companies’ entry into the financial industry is based on the obligation to open and share data held by existing financial institutions. Big Tech, which already holds massive subscriber information, can gain a strong competitive advantage over existing financial companies by securing financial data. If Big Tech attracts a large number of financial consumers based on its powerful IT platform in the future, the position of existing financial companies such as banks will significantly diminish. Concerns about reverse discrimination or an uneven playing field are already emerging from financial institutions.

In fact, such competition and conflict between new industries and existing industries are not unique to the financial sector. Looking far back, there was similar conflict and competition between carriages and automobiles, and more recently between taxis and innovative mobility services. Fundamentally, it is desirable for the government to support innovation in new industries by dismantling existing regulations while providing incentives to promote innovation by easing regulations for existing industries.

Meanwhile, another important issue is preparing for the possibility of global Big Tech companies entering the domestic financial industry. In the media content sector, global IT companies such as Netflix and YouTube have already dominated a significant portion of the domestic market. It is time to gather broad wisdom to prevent such unfortunate phenomena from recurring.

Seong-Yeop Lee, Professor at Korea University Graduate School of Technology Management and President of the Korean Data Law and Policy Association