To promote financial innovation, South Korean financial authorities have been pushing ahead with deregulation measures, including the authorization of internet-only banks and the introduction of a regulatory sandbox. However, Korea still has a long way to go to achieve financial innovation.
According to Ernst & Young (EY), a multinational professional services firm, Korea ranks 13th in the world in terms of fintech adoption among consumers. EY has found that 67 percent of Koreans are fintech adopters. It defines a fintech adopter as someone who has used two or more “buckets” of services. A bucket consists of a major fintech service, or two or more related services, such as online stockbroking and online investment advice.
South Korea’s fintech adoption rate has more than doubled from 32 percent in 2017, but still lags far behind not only China and India (87 percent), which share the first place, but also the Republic of South Africa (82 percent), Columbia (72 percent), and Peru (72 percent).
Viva Republic, a Korean fintech startup that has been operating mobile financial services platform Toss for years, is the only fintech unicorn with more than 1 trillion won (US$864.90 million) of corporate value in the country. Most Korean companies are still passive in attracting global investment and slow in overseas expansion of their businesses. As a result, few Korean fintech startups have drawn attention from global investors.
Industry insiders say that Korean financial authorities have made much progress in lifting regulations, but there are still many “shadow regulations,” or hidden regulations that stunt the growth of fintech.
Besides, the regulatory sandbox has been useful in driving innovation within a government department, but failed to create innovative goods and services that require cooperation among various government departments. So, a paradigm shift is needed from the government to remove regulations.