[Big Tech, Big Change] Regulation Only for Financial Companies... "Let Us Compete Fairly"

Allowing Postpaid Payments and Naver Bank Accounts
A Clear Example of Regulatory Loopholes

Financial Companies vs. Big Tech, Regulatory Discrimination
"Only Financial Companies Are Restrained by Regulations,
While Big Tech Is Given a Detour"

Financial Authorities Lack 'Tech' Experts
Need to Recruit IT-Savvy Talent
and Find a Balance Between Regulation and Promotion

[Asia Economy Reporter Minyoung Kim] “It is desirable that big tech companies enter the financial market to promote competition and enhance consumer benefits, but the problem is that ‘fair competition’ is not taking place. Financial institutions are tied down by regulations, while big tech companies are opening bypasses under the name of innovation.” (CEO of Bank A)

As the financial market offensive by big tech and fintech (finance + technology) companies intensifies over dominance in the financial market, existing financial institutions are increasingly voicing dissatisfaction about being bound by regulatory standards. Despite the need for big tech and fintech companies to follow the same rules fairly, existing financial institutions claim that these companies enter the market without significant regulation, playing on a ‘tilted playing field.’

Big Tech’s Entry into the Financial Sector

A representative example is allowing big tech companies to offer postpaid payment services and opening the MyData business to them. Postpaid payment is argued to be essentially a credit business, and while big tech companies acquire financial information from financial institutions, the latter cannot utilize big tech’s shopping and search data. Financial institutions, which have operated in finance for decades and invested massive capital to build high-quality data, must provide it unconditionally, yet they cannot receive customer information from fintech companies in return.

Big tech companies argue that they can provide loans to financially underserved groups, but financial institutions worry that the products supplied may mainly be financial products with high fees or advertising costs.

Asia Economy DB

Last month, Naver Financial’s launch of the ‘Naver Account’ also sparked controversy. The banking sector strongly opposed it, saying, “They advertised a comprehensive asset management account (CMA), which is not protected by deposit insurance, as if it were a bank deposit account.” The term ‘account’ refers to deposit or savings accounts created by banks, and there is concern that consumers might confuse it with bank accounts protected by deposit insurance. Although the financial authorities recommended a name change due to consumer misunderstanding, financial institutions are understandably frustrated by big tech’s ‘reckless intrusion.’

Growing Concerns in the Financial Sector

Experts point out that “given the frequent incidents even under financial regulations developed through decades of trial and error, it is time to establish sophisticated regulatory measures for big tech.” Of course, regulations that hinder innovation should be avoided, but balanced regulations that can induce synergy between existing financial institutions and emerging players are necessary.

Researcher Hyemi Kim from Hana Financial Management Research Institute said, “The entry of fintech and big tech into finance induces innovation such as the development of various financial products and services, intensifies competition within the financial industry, and allows financial consumers to use innovative financial services at lower costs than before.” However, she expressed concern that “if big tech funding products become widespread, banks may have to offer higher deposit interest rates to raise funds, increasing their funding costs and worsening profitability.” She added, “This could weaken the banks’ fund intermediation function.”

Underlying the fears of existing financial institutions is the possibility of big tech subordinating financial institutions using their platforms as weapons. Both companies have secured over 30 million customers each, forming a broad customer base that surpasses existing financial institutions.

Meanwhile, there is growing support for the argument that while opening the door to big tech, the financial authorities also need to enhance their expertise in IT. A CEO of a bank said, “Whether fintech or big tech, the important thing is ‘tech,’” and questioned, “How many financial regulators truly understand IT?” To find a balance between regulation and fostering growth, it is pointed out that the financial authorities need to recruit talent with IT expertise, such as coding skills.