Korea FinTech Observer #3

Welcome to the second edition of the Korea FinTech Observer, covering selected highlights from the two weeks leading up to April 21, 2024. Lots going on in the digital banking field, where a fourth license is up for grabs. The Korean Won dominated crypto trading in the first quarter, and Crypto.com is postponing its entry into the market after being investigated for AML violations.

Policy

• As a part of the government’s plan to continue to promote investment in the fintech industry, the FSC and related organizations have formulated a plan to set up a second batch of fintech innovation funds worth KRW500 billion for operation between 2024 and 2027; the first batch of fintech innovation funds ran between 2020 and 2023, during which it raised a total of KRW513.3 billion and supplied KRW282.4 billion in investment to some 85 fintech startups; for the second batch of fintech innovation funds, big tech platform companies will newly make contributions following an agreement signed at last year’s Korea Fintech Week; in addition, Korea Growth Investment Corporation will support business-to-business (B2B) collaboration and partnership between fintech businesses and financial and big tech companies
• The number of foreign residents in South Korea is expected to rise steadily in the coming years to account for up to 10.1% of the country’s total working population by 2042, the nation’s statistics agency said

Banking

• South Korea’s digital Toss Bank’s subscribers surpassed 10 million two and a half years since its launch in October 2021; while slower than KakaoBank, which reached 10 million customers in just two years, it surpasses K Bank, which required nearly seven years
• Shinhan Bank is set to enter the digital arena, vying for a license to become the country’s fourth internet-only bank, competing with established digital banks such as K bank, Kakao Bank, and Toss Bank; to bolster its bid, Shinhan has aligned itself with Douzone Bizon, an enterprise resource planning software provider, forming the Douzone Bank Consortium
• The race to receive the licence to become South Korea’s fourth Internet-only bank is growing fiercer, with four bidders announcing their will to contend; in addition to the above mentioned Douzone Bank Consortium, these are Soso Bank, Korea Credit Data Bank, and the U-Bank consortium
• With the recent expanding trend of Banking as a Service (BaaS), which allows consumers to experience banking services through fintech platforms, Shinhan Bank has partnered with the fintech company E9pay, specializing in small-scale overseas remittances; Shinhan Bank has signed a strategic business agreement with E9pay to pursue new business ventures and enhance platform competitiveness

Payments

• The Bank of Korea has decided to speed up its Central Bank Digital Currency project and launch a pilot test of the digital KRW this year; according to reports, 100,000 citizens will participate in the pilot test that aims to begin testing usability and deposits as the bank continues developing its CBDC
• According to the annual domestic payment trend report released by the Bank of Korea (BOK), the proportion of payments made using mobile phones out of total card transactions last year reached 50.5 percent; it was the first time in Korea that the proportion of payments made through mobile devices exceeded that of card payments, which stood at 49.5 percent; since reaching 38.6 percent in 2019, the prevalence of mobile payments has steadily increased over the past few years
• Samsung Electronics announced that 70% of Samsung Pay users have switched to Samsung Wallet, an upgraded version of its electronic wallet service launched by the company in March; in addition to the mobile payment and ATM usage offered by Samsung Pay, Samsung Wallet provides additional features such as digital keys, mobile identification, and storage for boarding passes
• Naver Pay signed a memorandum of understanding with Billboard and Billboard Korea on forming a strategic partnership to create synergy between the fintech and entertainment sectors; they will jointly pursue collaborative projects, as Billboard Korea is set to launch its entertainment business in Korea in June
• Viva Republica, the operator of the Korea’s finance super app Toss, shut down Toss South East Asia, its Southeast Asian business headquarters based in Singapore, last year, only a year after its establishment; its plan to introduce new financial services in Vietnam also hit a snag due to the Vietnamese government’s and central bank’s strict regulations
• Gaming giant Gravity Game Vision partners with global fintech EBANX; The partnership strategically aligns the two companies’ strengths to provide an immersive and seamless experience — including in the payment stage — for Latam players, starting in Brazil, Chile, and Mexico; customers in those countries will be able to pay for Ragnarok Origin: ROO Online with local payment options such as e-wallets, instant payments like the Brazilian Pix, account-based transfers, and cash-based methods, besides debit and credit cards

Digital Assets

• Crypto.com said it’s postponing a planned launch in South Korea after local news outlet Segye Ilbo reported that the exchange platform was facing an “urgent on-site inspection” over money laundering concerns; the report said that South Korea’s Financial Intelligence Unit (FIU) under the Financial Services Commission had discovered “problems related to anti-money laundering data” submitted by the exchange and began an on-site inspection
• The crypto fee war heats up in South Korea; Upbit has been the dominant player in the South Korean crypto market since early 2021 with an average market share of 82% over the past three years; however, competition has intensified during the recent bull run, with Bithumb and Korbit launching aggressive zero-fee campaigns in late 2023
• Korean Won topped US Dollar as preferred currency for crypto trades in first quarter of 2024; the Won recorded $456 billion in first quarter crypto trade volume
• Visiting the Digital Asset Market Scene — BDACS published an interview with its CEO Hongyul (Harry) Ryoo on the Korean ecosystem