[Big Tech, Big Change] Insurance, Loans, Securities, Data... Unstoppable 'N Techfin'

Subsidiary Establishment as a Stealth Entry Strategy
'Regulatory Bypass' with Postpaid Payment Features
Big Data Acquisition via Store
Preparing for Auto Insurance Comparison Quotes

[Asia Economy Reporters Ki Ha-young and Lee Jin-kyu] As Naver (NAVER) officially enters the financial market, tension is rising among existing financial industry players. Naver has chosen to indirectly enter the financial sector by establishing its subsidiary Naver Financial and adopting a 'partnership model.'

This approach differs from Kakao's 'direct competition' strategy, which involves establishing a bank and acquiring a securities firm. As a result, while traditional financial companies are bound by regulatory standards, Naver is accused of circumventing regulations to enter the financial market, leading to criticisms of a 'tilted playing field.'

According to financial industry sources on the 28th, Naver is expanding its business scope beyond small business loans to include simple payments, bank accounts, and insurance services, leveraging its position as the number one portal in Korea. With a daily user base reaching 30 million, Naver is accelerating its TechFin strategy by capitalizing on its portal users.

In the banking, insurance, and card sectors, concerns grow each time Naver launches a new product. The Financial Services Commission's approval of postpaid payment functions with a 300,000 KRW limit for big tech companies like Naver Pay, similar to credit cards, has led the credit industry to complain that Naver is avoiding the regulations imposed on existing financial companies. Credit companies are regulated under the Specialized Credit Finance Business Act regarding loan loss provisions and leverage ratios, but Naver is not subject to these rules.

The 'Naver Account,' launched last month by Naver Financial in partnership with Mirae Asset Daewoo, has also sparked controversy. This account links returns and point accumulation to usage performance on Naver Pay and Naver Shopping.

The strategy aims to maximize the 'lock-in' effect by securing loyal customers across various business areas such as simple payments, bank accounts, and e-commerce simultaneously through the Naver Account. The Naver Account targets small payment users who use the Naver portal and apps rather than customers who deposit large sums like traditional banks.

Naver users can sign up for the Naver Account using only their ID on the Naver application. The account offers a 3% return on deposits and an additional 3% point accumulation benefit when charging or paying via Naver Pay linked to the account.

[Image source=Yonhap News]

Vast Financial and Shopping Big Data Secured
Financial Industry Pushback... Controversy Over 'Tilted Playing Field'

Since its launch in June 2015, Naver Pay has provided not only simple payment functions but also peer-to-peer transfers, point accumulation and charging, and management of returns, exchanges, and deliveries, encompassing all functions necessary for e-commerce. Due to increased demand for contactless shopping amid the COVID-19 pandemic, the number of monthly payers exceeded 12.5 million in the first quarter.

From Naver's perspective, it can also secure vast financial and shopping-related big data based on payment histories of Naver Pay users on platforms like Naver Shopping and 'Smart Store.'

Naver stated, "From a store's perspective, using Naver Pay allows easy acquisition of users who find membership registration cumbersome through the Naver login function, and this leads to purchases, resulting in increased sales. This creates new competitiveness and business effects for small business owners."

In response, the banking sector strongly opposes, claiming that the comprehensive asset management account (CMA), which is not protected by deposit insurance, was advertised as if it were a bank deposit account.

The insurance industry also expresses concerns that Naver's entry into insurance could encroach upon the insurance market.

Naver Financial plans to launch a car insurance premium comparison platform within the year. On the 22nd of last month, it completed corporate registration under the name 'NF Insurance Service' at the Suwon District Court Seongnam Branch. Earlier this year, Naver CEO Han Seong-sook stated, "Starting with the Naver Account, we will enable users to access credit card recommendations, securities, and insurance through Naver Financial," adding, "We will launch financial services based on high-quality data and evolve into a comprehensive asset platform."

Naver Financial is currently in discussions with three companies?Hyundai Marine & Fire Insurance, KB Insurance, and DB Insurance?excluding Samsung Fire & Marine Insurance. It is reported that Naver Financial demands about 11% brokerage fees from sales when insurance is purchased through this platform.

A financial industry insider said, "In terms of market capitalization, Naver and Kakao already overshadow most financial companies, so it is questionable who holds the vested interests," adding, "Big tech companies that are not subject to as stringent regulations as the financial sector could face significant issues in the future if consumer protection problems arise."