Creating financial competitiveness
The prospect of the Korean economy remaining at 2 percent growth is gloomy. What’s more worrisome than the slump itself is that Korea’s growth rate has been lower than the global average for five consecutive years. It means that the Korean economy’s troubles are caused more by internal problems than external factors.
One of the problems is the financial industry in Korea. Our financial industry is considered even worse than that of Uganda, and unless financial competitiveness is drastically enhanced, becoming an economic power is a distant dream.
Those working in the financial industry say regulation is the biggest problem. They are not wrong about over-regulation keeping financial firms’ hands tied. But it is not the only cause of the discrepancy between Korea’s economic status and financial competitiveness.
The United States is the biggest financial market in the world, and we can learn from how global banks compete with each other there.
Let’s look at business hours. In the United States, most banks are open on Saturdays, but some are taking it a step further. TD Bank, a subsidiary of the Canadian Toronto-Dominion Bank, is open on Sundays and some national holidays. It also has extended operating hours. Its branches in Manhattan are open from 7:30 a.m. to 7 p.m. on weekdays. TD Bank differentiates itself by serving customers longer than any other bank.
Then, there’s how banks deal with credit card fraud or hacking. When a customer finds an unauthorized transaction and reports it, the bank gives an immediate refund. It will then conduct an investigation into the matter. Banks show that they trust their customers and prioritize their convenience.
They are also not overly strict on their rules. Mr. A, a Korean-American, was fined $35 by his U.S. bank after he overdrafted by a single dollar. He visited a branch and explained the situation, and the bank exempted the fee right way. Naturally, Mr. A now prefers doing business with the bank.
The banks’ online security systems are also different from those in Korea. Banks in the United States shoulder the responsibility of reinforcing their security systems against new viruses or hacking attempts. Customers don’t have to go through the inconvenience of installing a new security system every time something bad happens, as they do in Korea.
Many Korean banks have opened in New York, but have yet to find an edge. Bankers say that they can’t do business as aggressively as they’d like because their capital is small and they only have a few branches. The overseas branches only try to avoid losses, and that’s what the headquarters and supervisory authorities feel as well.
Samsung and LG, now leaders in the market, used to have products that would gather dust on the shelves of Best Buy. But they continued to develop new products and marketing strategies to expand. While the manufacturing sector’s model of success cannot be directly applied to the financial industry, it shows Korea’s financial firms can make it internationally if they try. The regulations that restrict financial entities need to be reformed. But the defeatism and passiveness of Korean financial companies must also change.
The author is the New York correspondent of the JoongAng Ilbo.
JoongAng Ilbo, Nov. 28, Page 34
BY LEE SANG-RYEOL