The development of smartphones is now about to change the global financial system. Fintech, a word that combines finance and technology, is rising as an attractive investment among IT giants. Fintech refers to any financial activities on internet or mobile devices, like Apple Pay, Google Wallet, PayPal, Amazon mobile payments, and bank mobile applications.
Fintech offers easier payment systems, which increases the likelihood of purchasing a product on a mobile device. Fintech also helps companies collect customer behavioral data with low cost. Customers benefits with free transactions fee and convenience. For instance, a company could collect data on when and where a customer tends make a purchase on real time. The company then could develop new promotion plans accordingly.
Korean IT companies are making moves to enter the Fintech market. On October 24th, Samsung Electronics announced Samsung Wallet’s partnership with Yelo Pay, a Korean fintech startup. Samsung Wallet was launched last September, but it plans to add money transfer feature, leveraging Yelo Pay’s fintech technology.
A leading Korean mobile messenger, Kakao Talk, also introduced a mobile payment service, Kakao Pay last September. In addition, Kakao Talk plans to launch money transfer service calls Bank Wallet Kakao this month, partnering with LG U+. LG CNS, a subsidiary of LG, introduced PayNow, a mobile applicatino that offers one-click payments services.
Korean startups, however, are facing difficulties in entering the fintech market. At the Fintech Mini Conference held at Startups Alliance, a Korean startup development center, many expressed concerns on the government regulations on fintech. Securing an investment seems to be the biggest challenge because Korean investors are concerned with the security on mobile payments. Entrepreneurs say that Investors often want to see a security certificate issued by Korean Financial Supervisory Service. However, only E-commerce companies are eligible for the certificate. The government is putting an effort to lower the market entry, but it seems that fintech is still a difficult market for startups.
Yu Shin Jeong, a business professor at Sogang University and a former CEO of Korea Venture Investment corporation, expressed a concern as well. He said the financial firms are not finding a reliable profit models and under the pressure of change.
Fintech will open lots of opportunities for future business models to both financial firms and startups. Yet, the government regulations seem to limits the opportunities to larger corporations. The rise of fintech among Korean startups are under questions.