[FINANCIAL REFORM] Policy changes focus on fintech

FINANCIAL REFORM

The year 2017 is set to be a big one for so-called fintech, or financial technology, as a wide range of policy changes will make digital services like robo-advisers and crowdfunding easier and more accessible.

Robo-advisers, referring to automated wealth management services, became a buzzword in 2016. In Korea, they have largely acted as a supplementary tool for human professionals in managing assets and investment portfolios. But under new rules set to go into effect by the second half this year, investors can fully entrust robo-advisers to handle financial advice and brokerage services.

The Financial Services Commission, the country’s regulatory agency, will complete trial operation of the robo-adviser system by April. “A total of 29 companies are participating in the trial session, operating their platforms on the test bed,” a source at the commission said.

This year will also see the nation’s first internet-only bank in full swing. K bank, run by a consortium led by telecommunications provider KT, received final approval from the Financial Services Commission last month and is set to launch by the end of this month.

Shim Sung-hoon, CEO and president of K bank, said the bank will focus on providing loans with midrange interest rates. It will target the 10 million people whose credit rating falls between four and six by offering lower commission fees.

And later in March, a new kind of player will debut in Korea’s financial industry: independent financial advisers. So far, advice on financial products has been offered by securities companies, which include advising fees in their commission fees.

The new independent financial advisers, unaffiliated with any financial institution, will be able to provide more impartial advice and recommend funds across different companies that will suit their clients, said Oh Sang-wan, head of the asset management supervision office at the Financial Supervisory Service.

Firms can register as independent financial advisers as long as they have a minimum capital of 100 million won ($83,000), a reduction from the current requirement of 500 million won. The Financial Services Commission has strengthened the qualifications for employees at such firms, requiring previous experience either as an asset manager, analyst or adviser at another investment consulting firm.

To maintain their impartiality, the firms are banned from receiving sales commissions from financial product developers such as asset management companies. They are only allowed to be paid by clients.

Private equity firms that exclusively cater to start-ups will debut this month. These firms will be able to receive tax benefits if they invest 50 percent of their funds in tech-related small and medium-size companies.

For those interested in crowdfunding, investors will be allowed to put in more money and get better access to information about crowdfunds starting this month.

In November, the Financial Services Commission decided to lower the requirement to become an accredited investor. Previously, the government only recognized accredited investors as those who placed more than 100 million won into a start-up in the past two years. Those who have made more than two investments of a combined 40 million won were also accepted as accredited investors.

The new rule lowers the bar to 50 million won for a single investment and 20 million won combined in cases of two investments or more.

Crowdfunding investors were banned from selling shares in start-ups for a year, but with the new rule, investors can sell startup stocks any time through the Korea Exchange’s KSM (Korea Startup Market) service.

To help attract more crowdfunding investors, the Financial Services Commission has also allowed funds to be advertised on social media and raised investment limits. Previously, investors could only access information about different crowdfunds through websites of brokers managing the investments.

Another major change in 2017 includes tightened eligibility criteria for a government mortgage program as it struggles to handle a deluge in applications and rein in household debt.

Starting this month, the Ministry of Strategy and Finance and Financial Services Commission will limit applicants for the Bogeumjari loan program based on income and lower the maximum price of houses eligible for the program. Bogeumjari loans have lower fixed interest rates and lengthier loan periods than traditional mortgages.

Previously, the program did not evaluate prospective borrowers’ income, but under new rules, a couple whose annual salary is less than 70 million won will qualify for the mortgage.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]