Fintech is upended by techies

Just a few short years ago, fintech was a buzzword that promised wonders: Old financial institutions would upgrade their technology and everything would be safer and easier for everyone when it came to money.

Now, it’s the big IT companies that are rushing into the intricate world of finance - because they’re the ones with immense amounts of data on customers collected over the years.

In Korea, Kakao is leading the way. Early this month, it got a final nod from financial authorities to acquire local brokerage house Baro Investment & Securities to kick off its long-awaited stock trading services.

Under the name Kakao Pay Securities, the IT firm plans to offer more accessible and easy asset management services including stock trading and funds investment.

“Based on Kakao Pay’s platform, we plan to popularize investment and asset management which have been centered on a select number of wealthy people and finance experts,” the company said.

Kakao Pay, a mobile payment service that launched in 2014, chalked up more than 30 million users as of last year. The amount of transactions users made through the app hit 20 trillion won ($16.5 billion) in 2018 and 22 trillion won in the first half of last year.

“Making the best use of the platform we have is our winning strategy in the finance industry,” said a Kakao Pay spokeswoman. “With the big data we accumulated through diverse services in Kakao Pay, we are planning to suggest investment methods that are easy and fun.”

Kakao Pay has been upgrading users’ accounts to include a stock account since Feb. 20, when requested. Customers with the upgraded accounts can start investing with as little as 1,000 won.

Kakao Pay Securities is considering starting a brokerage service as well, probably through a partnership.

Crating a whole new investment culture in Korea is not the only ambition for Kakao. In partnership with Samsung Fire & Marine Insurance, the tech giant plans to launch a digital insurance company within this year.

Rival Naver is also attempting to get into the finance industry, exploiting its immense pool of users and successful digital wallet service Naver Pay. Naver launched Naver Financial in November to offer financial services and attracted 800 billion won from Mirae Asset Daewoo. It plans to launch a bank account service in the first half of this year.

Naver CEO Han Seong-sook said in a conference call early this year that she will make Naver Financial into a comprehensive asset-managing platform by “launching high-involvement financial services such as loan programs based on good quality data.

“Beginning with the Naver bank account,” she said, “Naver Financial will expand into recommending credit cards, securities and insurance.”

Not much is known about what kind of services Naver Financial will introduce, but they will be based on its commerce platform, according to the company.

“The Naver Pay service is focused on making an actual payment on a commerce platform such as Naver Shopping,” said a Naver Financial spokesman. “It allowed us to collect more detailed data about users’ preferences compared to services that just transfer money, helping us to recommend more personalized and necessary items to the users.”

Naver Pay boasted of 30 million users last year, which means that whatever services Naver Financial launches, 30 million potential customers are lined up.

Unlike Kakao, however, Naver said it doesn’t have plans to jump into running an online bank.

Analysts say the tech firms’ forays into finance are inevitable.

“Tech companies have competitiveness over legacy financial institutions for their convenience, customers’ data and advanced technology,” said Yun Eul-jeong, an IT analyst at Shinyoung Securities.

“Their existing platform helped them gather immense amounts of data such as history of purchases, frequently visited websites and more. They can have much more detailed analysis of what kind of financial services the users need and want.”

Existing fintech companies are also expanding.

Toss, one of Korea’s first mobile payment platforms, is launching its own bank and securities firm, challenging traditional types of financial institutions once again.

“Toss’s bank unit will launch in the latter half of next year since it just got preliminary approval from the financial authorities,” said a Toss spokesman.

“A timeline for the securities firm is not yet confirmed as we are awaiting preliminary approval.”

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]