[1mm Financial Talk] Why Banks Are Hiring Patent Attorneys and Science PhDs

[Asia Economy Reporter Song Hwajeong] As the scale of technology finance, which supports companies with technological capabilities to smoothly raise funds, continues to grow, commercial banks are also making efforts such as securing talent to gain market dominance.

According to the Financial Services Commission on the 4th, among the 10 banks conducting their own technology evaluations related to technology finance (Kookmin, Shinhan, Woori, Hana, Nonghyup, Industrial, Busan, Daegu, and Gyeongnam banks), there are 177 internal experts including natural science PhDs, patent attorneys, and professional engineers. Banks are strengthening their own evaluation infrastructure to expand technology finance and are actively engaging not only in credit loan technology evaluations but also in investment technology evaluations. Securing specialized personnel is paramount for this.

The four major commercial banks each have around 20 related personnel. Hana Bank, for example, has a total of 29 people handling related tasks, including 5 PhDs, 2 patent attorneys, and 6 professional engineers. Shinhan Bank has 21, while Kookmin Bank and Woori Bank each have 20.

These experts are responsible for various technology finance activation tasks, from planning technology finance, preparing and reviewing Technology Credit Bureau (TCB) reports, launching related products, reviewing technology for technology-based equity investments, supporting intellectual property (IP) secured loans, providing technology consulting services, to conducting in-house training on new growth industries.

In April, Woori Bank and Kookmin Bank were designated by the Korean Intellectual Property Office as invention evaluation institutions. According to the Invention Promotion Act, invention evaluation institutions are specialized organizations that assess the technological and business feasibility of IP to estimate its economic value. Institutions meeting certain criteria, such as possessing specialized personnel and evaluation models, are designated. The evaluation results from these institutions are mainly used for issuing IP guarantees by guarantee institutions, IP-secured loans by banks, and IP investments by investment institutions, as well as for IP transactions, transfers, and business feasibility analyses during commercialization processes.

Besides securing personnel, banks are also promoting technology finance by launching special promotional products, discovering companies with excellent technological capabilities and innovative growth companies, and expanding financial support linked to ESG (Environmental, Social, and Governance) and TCB.

The reason banks are actively expanding technology finance is that the market size is continuously growing. Technology finance supports small and medium-sized enterprises (SMEs) that lack real estate collateral or creditworthiness but have technological capabilities to smoothly raise funds. It provides SMEs with insufficient financial power with loans at lower interest rates and higher limits. According to the Financial Services Commission, the outstanding balance of technology finance loans reached KRW 339.3 trillion as of the end of May. The outstanding balance of technology finance loans has steadily increased from KRW 205.5 trillion at the end of 2019 to KRW 266.9 trillion at the end of 2020, and KRW 316.4 trillion at the end of last year.

Banks are also actively expanding investments based on technology finance. The number of bank-conducted investment evaluations increased by 27.8%, from 108 cases in the first half of last year to 138 cases in the second half. Investment performance based on bank evaluations also rose by 14.4%, from KRW 164.3 billion to KRW 188 billion during the same period.