[New Financial Hegemony War] Constant Clashes... Banks vs Big Tech, Survival Battle for Dominance

Indefinite Postponement of Major Debt Refinancing Platform Conflict
Intense Battle for Leadership Between Banks and Big Tech Over Survival
Experts Advise "Same Business, Same Regulation" as Solution

[Asia Economy Reporters Jin-ho Kim and Ki-ho Sung] As the financial lives of the public rapidly shift toward a ‘platform’ 중심, conflicts between traditional financial institutions and big tech (large information and communication companies) are intensifying. This is because their respective interests are sharply intertwined in the struggle for dominance in the new financial environment. While the financial sector protests that excessive privileges are being granted only to big tech, big tech counters by accusing the financial sector of neglecting consumer benefits.

Amid rapid environmental changes and sharply conflicting interests, financial authorities also seem unable to maintain a firm stance. In particular, they are not free from criticism that they have unilaterally favored big tech by excessively emphasizing innovative finance, thereby triggering conflict. Experts advise leaving the market to self-regulation but applying the principle of ‘same business, same regulation’ as the solution.

◆ Financial Institutions VS Big Tech ? A Survival Battle for Dominance = As big tech and fintech companies expand their financial territories on all fronts, the survival battle for supremacy with traditional financial institutions is expressed in every issue. In the rapidly changing paradigm of the financial market, who gains dominance determines whether one will be subordinate or dominant.

The most controversial issue recently has been the refinancing loan platform. Initially, financial authorities planned to launch it on the 24th of next month. Major commercial banks strongly opposed the service, fearing subordination to big tech upon its launch, while big tech companies emphasized its necessity for consumer benefits. Amid this tense standoff, the mood shifted with the replacement of the head of the financial authorities. On the 3rd, Go Seung-beom, the new chairman of the Financial Services Commission, told reporters, "The refinancing loan platform service is an issue that needs continuous review," adding, "We will not be bound by the reconsideration deadline and will negotiate sufficiently even if it takes time."

The refinancing loan platform is one of the key projects created by financial authorities with the aim of reducing interest burdens on ordinary citizens by making it easy to switch ‘all household loans’.

The refinancing loan platform is expected to have significant ripple effects because it allows easy and convenient loan switching. Since the scale of household loans reaches about 1,800 trillion won, fierce interest rate competition could enable financial institutions to steal ‘home customers’ from competitors. All financial institutions will inevitably engage in ‘endless competition’ to steal and retain customers.

However, the existing financial sector is reluctant to participate, citing that the platform’s dominance lies with big tech. There are concerns that it might degenerate into merely providing product procurement functions while offering high fees. A banking sector official said, "The bear (banks) will do the tricks, but the king’s son-in-law (big tech) will take the money," adding, "We understand the financial authorities’ intention, but the big tech-centered operation is excessive." On the other hand, big tech companies emphasize consumer benefits and counter that the existing financial sector’s claims are excessive.

◆ Government Hesitant, Experts Say "Same Business, Same Regulation" is the Solution = The government is merely watching between the financial sector and big tech. While basically sympathizing with big tech’s stance emphasizing consumer benefits, it cannot ignore the dissatisfaction of existing financial institutions. Otherwise, it could be seen as demanding that the dominance in the new financial environment be unilaterally handed over to big tech.

In particular, the government has been criticized for ‘favoring big tech’ during the past few years of pushing various policies under the banner of ‘innovative finance.’ Similar situations have occurred even before the refinancing loan platform.

Experts point out that as the digital financial era has fully begun, clashes between two groups with different interests were inevitable, but financial authorities were unprepared. To prevent greater confusion, they say that applying the same regulations to the same business should be done now to fundamentally block so-called ‘privilege disputes.’

Professor Sang-bong Kim of the Department of Economics at Hansung University said, "In the case of the refinancing loan platform, the current system could cause so-called unfair trade issues," adding, "To avoid such controversies, applying the same regulations to the same business is the right path."

Professor Min-hwan Lee of the Department of Global Finance at Inha University also said, "Big tech’s businesses are no different from financial businesses, but since they are not sufficiently regulated, existing financial institutions naturally have concerns," adding, "If it is difficult to unify regulations for the two industries, at least the same regulations should be applied to the same business to protect consumers and minimize conflicts between companies."

He continued, "From the authorities’ perspective, the rapid changes in the financial environment pose difficulties, but it is necessary to simultaneously work on changing the framework for regulation and supervision to keep up with the flow of finance as soon as possible."