[The Editors' Verdict] Creating Financial Services with My Data

[Jung Yoo-shin, Dean of the Graduate School of Technology Management at Sogang University and Chairman of the China Capital Market Research Association] Earlier this year, with the passage of the three Data Acts (Personal Information Protection Act, Information and Communications Network Act, Credit Information Act) through the National Assembly, South Korea has officially entered the data economy era. Interest in data within the industry has surged, making the saying "Big Data is the oil of the 21st century" truly resonate. Among these, the enthusiasm for the "MyData industry" is the hottest. In a recent survey of MyData business applicants, as many as 116 companies applied for designation, of which 41 companies (35%) were non-financial firms. This indicates high interest regardless of whether they are in the financial or non-financial sectors. So, what exactly is the MyData industry, and why is there such strong interest?

MyData refers to data collected by data businesses on behalf of individuals, gathering financial data such as account balances and transaction details scattered across financial institutions. The MyData industry is a business that utilizes this data to provide various customized financial services. In short, it is the concept of "creating financial services for me using my data." The key here is that personal information is collected with individual consent to provide better financial services. Unlike before, when personal information was only protected, this approach actively uses personal data to enhance individual benefits, representing a new paradigm shift and the birth of a new financial industry.

What background has made this paradigm shift possible? Experts point first to the Fourth Industrial Revolution and digital innovation, which have enabled easy and rapid collection, analysis, and utilization of personal data digitally. Without a system for quick personal data collection and analysis results delivery via digital and mobile platforms, the MyData business model itself could not exist. Second, innovations in data processing technologies are important. Through so-called ABCD technologies (Artificial Intelligence, Blockchain, Cloud, Big Data), a variety of customized services can be provided to individual customers. Third, experts believe that global competition surrounding personal data utilization also plays a role. To counter the data dominance of U.S. companies like Google, Europe has implemented a new Personal Data Protection Regulation (GDPR) since May 2018. Europe's new data protection law shifts consumer protection from "preventing data breaches" to a more proactive perspective of "utilizing personal data."

The MyData industry is actively welcomed not only by the industry seeking business designation but also by financial authorities and consumers. What effects are expected to cause such enthusiasm?

First, it is expected to maximize consumer satisfaction and improve market efficiency. Until now, banks, insurance, and securities have been "segmented" markets. Although each claimed to offer the best customized products to customers, these were the best within each bank, insurance, or securities company, not across the entire market. Now, by utilizing market-wide data through MyData, the best customized products can be offered at the market level rather than by individual financial companies. This means increased consumer benefits and improved market efficiency through competition.

Second, it improves the efficiency of the financial industry and reduces costs. Since MyData businesses will provide services to many customers through digital channels, they are more efficient and have a lower cost structure compared to traditional analog financial institutions. Therefore, the burden on customers paying for financial products can be reduced.

Third, competition in financial product sales channels is expected to intensify. When customers can directly view and transfer all their accounts through MyData businesses in their hands, there is no reason for sales channels to be limited to large financial institutions. The online sales market will rapidly expand, leading to a decrease in sales commissions.

Fourth, there is an employment effect as a new industry. The MyData industry is a new industry that utilizes personal information and data. Therefore, it is expected not to harm employment in the existing financial industry but to expand employment through the creation of various new revenue models in the new industry.

Fifth, although the MyData industry is based on financial data, it is also possible to provide convergence services by combining non-financial information such as distribution, telecommunications, and medical information.

Jung Yoo-shin, Dean of the Graduate School of Technology Management at Sogang University and Chairman of the China Capital Market Research Association