Non-financial technology companies with a growing expertise in FinTech (financial technology) will play a bigger role in shaping South Korea’s financial industry, according to the country’s central bank.
In a recent report by the Bank of Korea, the central bank sees non-financial, technology-oriented companies to make a big splash in the country’s financial industry.
“Nonfinancial institutions that have the technology will play a bigger role in business such as consumer banking, money transfers and transactions, investments and asset management that are currently mainly run by financial institutions,” read an excerpt from the report, published by Korea Joongang Daily.
The banking authority points to a trend of a number of global technology companies entering the Korean financial market to introduce digital banking products, pushing adoption of financial technologies. The report particularly points to blockchain technology and artificial intelligence as two innovations that have already seen implementation in the market. The central bank sees two technologies to be the core from which further layers of products and services are developed.
By encouraging competition, the Bank of Korea sees the entry of new players in the financial market to challenge established banking giants. This trend will, in turn, benefit the financial system as a whole, the report adds. The market’s eroding dependence on a single or a small number of giant financial institutions will help avert a system-wide financial crisis in the event of these major banks collapsing.
The central bank also called for traditional banking institutions to be open to change, urging them to cooperate with Fintech startups and firms to embrace digitization. Technology startups with FinTech expertise are, in-turn asked to by the central bank to focus on mitigating any possible risks such as intrusion of privacy in the digital age.
The Bank of Korea’s report also revealed that the bank is likely to consider issuing its own digital currency in the near future, faced with the inevitable changing landscape of finance.
The South Korean government has announced significant moves to promote the FinTech sector in the country. In October 2016, the government announced a pledge of 3 trillion won (approx. $2.65 billion) over the next three years to financial support Fintech startups to boost the industry. That announcement was followed up with a notable decision by South Korean authorities to regulate bitcoin exchanges in the country, to be expected this year.
In a more recent announcement this year, South Korea’s financial regulator and authority, the Financial Services Commission (FSC), revealed its plan to launch a blockchain-powered pilot project for the financial services industry. The country has already seen the formation of its first blockchain consortium consisting of 21 financial institutions and 5 blockchain technology firms.
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