[Financial One-App Strategy] Why Does It Fail?... Consumer Protection & Convenience Walking a Fine Line

The Reason Why the 'One App' Enabling All Financial Transactions Is Not Easy

[Asia Economy Reporter Park Sun-mi] The main reason financial companies have yet to achieve true app integration is the complex entanglement of regulations and interests across different financial sectors. Financial firms are counterattacking by developing ‘financial platforms’ that encompass multiple services to compete with the ‘super apps’ promoted by big tech companies (large information technology firms), but many obstacles remain. Although financial authorities have promised to support the institutional foundation to resolve the ‘tilted playing field’ controversy between big tech and banks, they face the challenge of redefining regulatory boundaries between consumer protection and convenience.

◆Why a ‘one-app’ that handles all financial transactions is difficult= The one-app strategy adopted by major domestic financial groups involves creating an integrated banking app that consolidates scattered bank app functions, then expanding access to services of affiliated financial companies based on this app.

This is necessary to maximize synergy among financial affiliates with the full implementation of the MyData system using application programming interface (API) methods starting January 1 next year. MyData operators can analyze customers’ transaction histories from banks, cards, insurance, investments, etc., to recommend advantageous financial products, and customers can easily subscribe to customized products through one-stop comparison. Financial groups with portfolios across financial sectors can expand their customer base and scale services by enabling a genuine ‘one-app’ service.

However, since the 2014 personal information leak incident at card companies, sharing customer information among group companies has been difficult. To prevent this, legal hurdles have been raised through laws such as the Financial Holding Companies Act, the Capital Markets Act, and the Financial Consumer Protection Act, making it hard to unify all services of financial affiliates into one app.

A bank official explained, “System-wise, it is possible to handle securities, card, insurance, and other financial affiliate tasks within a single bank app, but for consumer protection, when creating transaction ledgers through non-face-to-face real-name verification, the process must go directly through the respective affiliate.” He added, “This is to prevent abuse of account opening and protect customer information, as recommended by financial authorities.”

Another bank official said, “Although MyData has lowered barriers between financial sectors, it is true that the financial affiliate tasks available in a single app are still focused on simple inquiries. For various financial product subscriptions and transactions to become active, many financial regulations still need to be dismantled.”

◆Challenges remain despite promises of regulatory easing= Financial authorities have expressed their willingness to support the establishment of one-app systems in response to financial groups’ complaints about the ‘tilted playing field.’

Financial Supervisory Service Governor Jeong Eun-bo recently stated at a meeting with financial holding company chairpersons, “We will consider ways to facilitate smoother information sharing within financial groups to enhance synergy,” reflecting awareness of industry difficulties. Financial Services Commission Chairman Ko Seung-beom also said, “We will create institutional conditions to enable a digital universal bank that provides various services such as banking, securities, and insurance tailored to customer needs through a single super app.”

However, financial authorities do not attribute the slow progress in building integrated platforms solely to regulations. While there are principles to protect financial consumers and comply with financial sector laws, they see the significant gap in interests among financial affiliates within groups as a bigger factor. An official said, “The difficulty in building integrated platforms is due not only to regulations but also to complex internal differences within groups. We will create institutional conditions to strengthen platform competitiveness, but it will be challenging to reach consensus and proceed due to differing interests among sectors within groups.”

The fintech industry, which already offers all financial services in a single app, also views the banks’ belated ‘one-app’ strategy as challenging. A fintech official said, “Financial companies are rushing to implement one-app strategies, but it will be difficult to integrate existing apps and eliminate overlapping apps. Conflicts of interest among affiliates make it hard for large organizations.”

Experts emphasize the urgent need to improve fairness to resolve disparities with big tech and fintech companies that freely operate financial and non-financial businesses for consumer benefit. Kim Woo-jin, Senior Research Fellow at the Korea Institute of Finance, argues that financial authorities should allow domestic financial holding companies to operate non-financial platforms as well. He advised, “Since authorities have announced they will consider allowing digital universal banks, they should promptly prepare detailed measures to improve regulatory fairness as a follow-up.”