Toward real Internet banksKorea’s first Internet-only bank will launch within this year. Financial authorities have received applications from three Internet bank consortia led by Kakao, Interpark and KT - all local ICT companies. One or two of them will become the first Internet bank in Korea. As Internet banks are the pinnacle of so-called FinTech, or financial technology, it could work a miracle in escalating our outmoded financial system to the level of advanced countries.
If you take a deeper look into other aspects of those consortia, however, we cannot but wonder if they really can be revolutionary because each consortium has a traditional banking institution at its center. Under such circumstances, they can hardly achieve the original goal of “breaking the existing financial order.” In other words, if traditional financial companies become a pillar of Internet banking, we will barely be able to discern a difference between current Internet banking services at conventional banks and the new Internet bank.
Such a problem occurs because our financial authorities want to permit the establishment of Internet banks without changing our current law on banks. Under the current law, industrial companies can own as high as 4 percent of total shares of a bank. With the authorities’ approval, industrial capital’s share can increase to 10 percent, yet the shares exceeding the 4 percent limit are not eligible to exercise votes. Moreover, the authorities have restricted qualifications for directors to “those with experience in and knowledge about finance.” Put differently, the ICT companies that applied this time cannot lead the business of Internet banking.
As the coinage suggests, FinTech is a combination of ICT and finance. The ICT companies change the roaring tide of global finance. In order to take advantage of such a gargantuan shift in the financial sector, we must change an anachronistic system that bans industrial capital from participating in the establishment of Internet banks. The government planned to revise the current law on banks to raise the cap on industrial capital’s shares to 50 percent in the particular case of Internet banks. But after facing strong opposition from politicians, the administration was reluctant to push forward the lifting of the cap.
We understand the opposition’s stance that banks must not turn into private coffers for conglomerates. But at the same time, it must not go against global trends. China has been introducing Internet banks based on consortia with industrial companies ahead of us. Even if industrial capital’s cap on shares is upped to 50 percent, chaebol with cross-shareholdings are excluded. If the government really finds it difficult to amend the law on banks, it can instead devise alternate legislation when it comes to financial technology.
JoongAng Ilbo, Oct. 6, Page 30