Ruling Party Says "Voluntary Participation,"
But "Most Still Operating at a Deficit"
[Asia Economy Reporter Kiho Sung] As the profit-sharing system promoted by the Democratic Party of Korea expands comprehensively, the fintech industry is becoming increasingly tense. Although the ruling party emphasized "voluntary participation," there are concerns that if resources allocated for investment and hiring are diverted to the profit-sharing system amid a challenging market environment, it could lead to a decline in the competitiveness of the entire industry sector.
According to the financial industry on the 26th, the Democratic Party's 'Post-Corona Inequality Resolution Task Force (TF)' recently held a private video conference with platform company organizations such as the Korea Fintech Industry Association, Internet Enterprise Association, and Korea Startup Forum. Initially, the Democratic Party invited IT companies directly to the meeting, but as these companies showed reluctance, the associations were called instead.
After the meeting, Democratic Party spokesperson Young Heo told reporters, "We cleared up misunderstandings about the profit-sharing system," adding, "We agreed that it is not a means to force companies to share profits but a policy to help companies, strengthen incentives, and provide support."
However, fintech companies observing the meeting expressed a sense of "bewilderment." A fintech industry official said, "I don't understand the basis for claiming that the fintech industry has greatly benefited from the COVID-19 pandemic," expressing dissatisfaction by saying, "Most companies are operating at a loss, so what profits are we supposed to share?"
In fact, looking at operating profits in 2019, Kakao Bank barely made a profit with 13.3 billion KRW, while Viva Republica, which operates Kakao Pay and Toss, recorded losses of 65.1 billion KRW and 115.4 billion KRW respectively. Although last year's performance is expected to be announced soon, the general view is that it is difficult to expect profits due to increased user numbers during the COVID-19 pandemic and the high costs of facility investments.
Additionally, the industry has consistently demanded deregulation and institutional improvements, but both the government and political circles have ignored these requests while encouraging participation in the profit-sharing system, which the industry finds incomprehensible.
Professor Gunhee Lee of Sogang University Graduate School of Business said, "Among the government's COVID-19 recovery policies, the systems built by fintech companies were of great help," and pointed out, "The profit-sharing system is excessive while the entire industry is working on jobs and investments for the future."
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