The growth of the fintech industry in Korea is slower than in other countries such as the United States due to an immature ecosystem and a delay in invigorating competition in the sector, the Financial Supervisory Service (FSS) said on June 6.
In the United States and Europe, mega deals worth more than 1 trillion won have been made among fintech companies. However, no such deals have been made in Korea.
In 2018, M&As accounted for 65 percent of the total investment in the global fintech industry, but in Korea, the comparable figure was about 10 percent.
In addition, fintech experts say that the positive regulatory system in Korea is limiting big ICT companies’ entry into the financial sector and making it difficult for the Korean fintech industry to increase its competitiveness.
As of January this year, there were a total of 39 global fintech unicorn companies, with their combined value estimated at 162 trillion won. Among them, Korea had only one company, Toss.
Prior to 2017, the global fintech market had 23 unicorn companies. But in Korea, Toss became the first fintech unicorn company at the end of 2018.
Investments were boosted by a number of mega deals including those worth more than 1 trillion won per deal in the US and Europe. Last year, nine of the 10 largest investments in the global fintech industry were M&A deals involving Refinitive (20 trillion won) of the United States, World Fay (15.2 trillion won) of the United Kingdom and Nets (6.4 trillion won) of Denmark.
Meanwhile, over the past four years, domestic and foreign venture capital companies have invested in 96 Korean fintech companies. However, M&As (9 cases) accounted for about 10 percent. Major domestic fintech companies are growing by attracting investment from domestic and foreign venture capital firms rather than through M&As. Toss and Lendit received 220 billion won and 24.3 billion won in investment, respectively, from overseas venture capital firms. Bank Salad attracted a total of 24 billion won in investment from Korean venture capital companies until 2018.
Since 2015, there have been three acquisition cases where domestic financial companies took over fintech companies -- one by a financial holding company, one by a credit card company and one by a securities firm.
In the meantime, big tech companies have weaker power over the financial market in Korea compared to foreign financial markets. Google, Amazon, Facebook and Apple (GAFA) of the United States and China's Alibaba and Tencent are employing strategies differentiated from others with tailored financial services in the payment, online loan and insurance sectors based on their strong customer bases. In Korea, large IT platform companies such as Naver and Kakao were registered as electronic financial service providers, and are making a foray into the easy payment and remittance markets.