Creating a global name in finance

Consortiums led by Kakao, the operator of the country’s No. 1 instant messaging app, and the No. 2 wireless carrier KT received preliminary approval to run the country’s first Internet bank, financial authorities announced Sunday.

It is Korea’s first bank license since the Peace Bank opened in 1992.

The creation of a web-based bank could entirely reshape the financial landscape. Borrowers can seek out loans more easily at interest rate of 10 to 20 percent and the country can position itself as a more competitive player in the global financial technology market.

Currently, Korean names are absent among the 500 global fintech companies: There are 374 from the United States, 57 from Britain and 10 from China.

Since Internet companies first opened in the United States in 1995, online banking businesses have been active in more than 50 countries.

Korea, which prides itself as an ICT powerhouse, is joining late in the game. As such, it has to work harder to create a name in the global financial sector.

An online bank is an inventive and innovative business model. A non-financial company must do the unthinkable in the financial sector and pave an entirely new path when it comes to doing financial business.

The entry barriers must be removed, and the regulation preventing industrial capital from holding no more than a 4 percent stake in a banking company should be the first to go.

The government is currently considering a revision in the banking law that would allow a shareholder to own up to a 50 percent stake in an Internet bank, while limiting access by 61 cross-affiliated companies, or chaebols.

But the bill’s approval is expected to be blocked by the main opposition. Without a clear majority stakeholder, the success of an Internet bank cannot be ensured.

The opposition has reason to be concerned about the banking sector falling under corporate control. But Europe doesn’t have a limit on capital investment in banks, and the United States allows industrial capital to own up to a 25 percent stake in banks.

Even China allows industrial participation in Internet bank consortiums. The government instead should try to persuade the opposition by tightening supervision so that the fintech industry can be allowed to start on safe grounds.

JoongAng Ilbo, Nov. 30, Page 34