"Financial Big Tech to Check Bank Oligopoly, Risk Management Also Crucial"

Positive Effects but Risk Management Needed
"Caution Required for Algorithm Opacity and Risk Transfer to Non-Financial Firms"

[Asia Economy Reporter Minwoo Lee] As the government criticized banks for profiting from interest and emphasized the need to increase various market participants to foster competition, a seminar diagnosing the financial entry of big tech companies such as Naver, Kakao, and Toss was held. While competition can check banks and increase consumer benefits, opinions were exchanged that risk management ensuring internal controls, soundness, and liquidity is also important for big tech.

On the 17th, the Financial Supervisory Service (FSS), together with the Korea Institute of Finance and the Korea Fintech Industry Association, held a seminar titled "Diagnosis of Big Tech's Entry into the Financial Industry and Future Tasks" at the Bankers Association in Jung-gu, Seoul, with participation from academia and industry experts.

Lee Bok-hyun, Governor of the Financial Supervisory Service, stated, "As big tech enters the financial industry, positive effects such as increased convenience of financial services, resolution of information asymmetry between financial consumers and providers, and improved financial accessibility for low-income and vulnerable groups have emerged. They also perform public interest roles such as preventing voice phishing damage using big data." He added, "Big tech's entry into finance will stimulate digital innovation in existing financial companies, promoting growth and competition in the financial market."

However, he also expressed concerns about new risks arising from the characteristics of big tech. With the expansion of non-face-to-face transactions through platforms, volatility in cash flow increases, posing risks to the stability of the financial market. Additionally, due to the high interconnectivity between IT non-financial companies and financial companies within big tech groups, operational risks of big tech could transfer to financial companies. Furthermore, he pointed out that if issues such as opacity in financial product recommendation algorithms arise, there is a risk of infringing on the benefits of financial consumers.

Governor Lee emphasized, "Big tech must enhance risk management and internal control capabilities to secure the trust of financial consumers, enabling a virtuous cycle that promotes innovation in the financial industry."

At the event, presentations by experts from various fields were conducted. Specifically, topics discussed included ▲Current status and achievements of big tech's entry into finance (Kim Si-hong, Senior Advisor at Law Firm Gwangjang) ▲Importance within the financial system and systemic risk factors of big tech financial groups (Lee Hyo-seop, Director at Capital Market Research Institute) ▲Discussions on regulation of big tech financial groups and future tasks (Seo Byung-ho, Director at Korea Institute of Finance).

An FSS official stated, "Based on the presentations and discussions at this seminar, we will review and analyze potential risk factors of big tech and continuously seek ways to improve supervisory systems in the future."