Future Growth Engine
Samsung Electronics is expanding its business in the financial market for sustainable growth based on fintech.
Samsung Electronics has led the growth of the entire Samsung Group as a global leading smartphone and semiconductor manufacturer. Samsung Electronics ranked 29th among 500 companies with the largest market caps last year according to Bloomberg, despite its less-than-expected performance as of late. Still, its quarterly operating profits dipped below 5 trillion won (US$4.5 billion) last year, as Chinese manufacturers accelerated their growth and competition increased in the global electronics market. Under the circumstances, its rivals like Apple and Google are rushing into the fintech industry, and Samsung is looking to turn the current situation into an opportunity.
The global fintech industry has a very bright outlook. Global investment in the sector has more than tripled for the last five years, and market research firm Gartner recently predicted that the mobile payment market will expand to US$721 billion by 2017. Given that the focus of future financial services is shifting to big data, the Internet of Things (IoT) and the cloud platform, Samsung can be considered to have a comparative advantage because it has business backgrounds in both finance and IT.
Nonetheless, the company has to tackle domestic regulations, although the Korean government is discussing the relaxation of the regulations on banking-commerce separation for Internet primary banks these days. According to the current Banking Act, industrial capital’s share in a bank is limited to 4 percent or less, and a non-financial business operator whose total assets exceed 2 trillion won (US$1.8 billion) or whose total assets in non-financial subsidiaries exceed 25 percent of the total assets cannot be the largest shareholder of a bank.
Regarding this point, Samsung Securities recently pointed out that a strict separation between banking and commerce will result in the domination of Internet primary banks by commercial banks, and they will stop at expanded online banking services, rather than large-scale investments, concerned over losing their customers. The Woori Finance Research Institute also mentioned that Korea has no fintech company at all for now, whereas 374 fintech firms are doing business in the U.S., which could lead to market subordination in the long term.
At present, non-banking financial companies and industrial capital are allowed to set up Internet primary banks in the United States. Japan revised its banking act in 1997, so non-financial organizations can own more than 20 percent of bank shares.