MyData services are about to take off, and Korea's fintech startups are moving on every front.
With MyData services — which hand consumers back the right to decide how their own personal data is used — set to take off in earnest, we came across a feature article that takes a close look at the major Korean fintech startups active across the field, and we wanted to share it with you.
ICONLOOP was featured as one of the representative fintech startups expanding its cooperation with the financial sector on the back of its own DID technology. Back in 2020, ICONLOOP worked with Shinhan Bank to commercialize Korea's first DID service used in the financial sector, drawing attention across the industry. In 2021 it followed up with NongHyup (NH) Bank, launching "NH Bank Financial Real-Name Verification," a DID-based real-name verification service, helping open the door to the era of DID in finance.
As MyData services get going, we expect far more openings to bring technology into finance and drive innovation — and ICONLOOP will keep working so that more and more users can experience how convenient and secure DID technology is.
[K-Startup Industry Map] Buying shares in songs and calves, letting AI pick your stocks… fintech startups in full bloom
From "catfish" to "whale." That is how people describe KakaoBank, which went public last year. Launched as Korea's first internet-only bank, KakaoBank was expected to play the role of a catfish stirring the incumbent banks toward innovation. The result went beyond expectations. Just four years after its founding, it surpassed the market capitalization of the established banks and established itself as the industry's number-one "big tech." What followed was the era of fintech — startups grafting technology onto finance. The cryptocurrency boom around bitcoin and others propelled Dunamu and K Bank forward, and Toss Bank, "the bank of the MZ generation," made a spectacular debut.
Finance has long been counted as the industry where innovation moves the slowest, because government regulation is so demanding. But now fintech startups are active on every front, to the point that the incumbent banks call their competition with big tech an "uneven playing field." This year, MyData services that hand consumers back the right to decide how their own personal data is used are getting under way in earnest, and competition among fintech startups is expected to grow fiercer still.
So which are Korea's major fintech startups?
From loan comparison to fractional investment
Musicow passes one million cumulative members
Founded in January of last year, BestFin operates Dambee, an online-to-offline mortgage comparison platform. In Korea's lending market, the five major commercial banks (Woori, KB, Shinhan, Hana and NongHyup) account for 82% of home mortgage loans and 73% of household credit loans (as of March 2020). Dambee lets customers compare rates on mortgage loans and jeonse deposit loans and take out the loan in one stop, without visiting any of those institutions. It also offers a "we come to you" service, in which a loan consultant designated by the financial institution visits at a time and place of the customer's choosing to complete the loan process. Going forward, the company plans to partner with secondary financial institutions as well to expand into business loans and credit loans, and to develop products that can be linked with insurance, credit cards and more.
GoWid is a bank built for startups. Its role model is Silicon Valley Bank (SVB) in the United States, which provides specialized financial services to startups in the Silicon Valley area. Roughly a year after introducing Korea's first corporate credit card for startups, it had signed up some 3,000 client companies, and it is concentrating on financial services for startups. It also offers services optimized for startup cost management, such as expense management and cash flow services. GoWid plans to build on the startup financial data it has gathered through its corporate credit card business to expand into a range of B2B (business-to-business) financial services that maximize startup growth, including IT device subscription services and lending.
Chai Corporation ("Chai") was founded by Daniel Shin, the founder of TMON. It operates Chai Card, a prepaid check card with game elements built in, and I'mport, a B2B payments platform. Launched in June 2019, Chai Card has been winning over MZ generation users with the "Lightning" items handed out at payment and "Boost," which lets you burn those lightning bolts for discounts as if playing a game. In February the company also announced the launch of Chai Credit Card, a PLCC (private label credit card) that expands on the discounts and cashback benefits of the Chai check card. I'mport has so far been adopted by some 2,200 companies in Korea and abroad, including KREAM, Nike Korea, Ohou and Gentle Monster. Chai plans to push into overseas markets on the back of the KRW 53 billion investment it raised late last year from SoftBank Ventures and others.
Musicow is an investment platform for claims to participate in music copyright royalties. It threw open to individuals a music royalty market that had never been an investable asset before. In its first year after launching in 2018, the platform had 9,996 members and cumulative transactions of about KRW 1 billion; recently it passed one million cumulative members. The secret to its success was grafting technology onto finance. Musicow developed its own royalty forecasting system based on historical royalty data.
Using that, it converted future cumulative royalty income into a fair present value. It then sliced that right into small pieces and turned it into a financial product that can be traded like a stock. The "fractional investment" market Musicow pioneered was later followed by Bancow (Korean cattle), Kasa Korea (real estate), Art Together and TESSA (both artworks).
Artificial intelligence (AI) wealth management
A robo-advisor boom, for financial institutions and individuals alike
"Personal wealth management," once unthinkable for anyone short of the very wealthy, has now become an everyday thing. The credit goes to the popularization of artificial intelligence (AI) based "robo-advisors (RA)." The services offered by robo-advisor fintech startups use big data analysis to recommend portfolios matched to an individual's investment style and goals.
Fount, founded by CEO Youngbin Kim in 2018, is a leading example. Fount is also well known as the startup where world-famous investor Jim Rogers takes part as an angel investor and investment advisor. The AI Fount developed in-house helps investors diversify across a wide range of assets, including global equities, bonds and commodities. Fount's assets under management (AUM) now comfortably exceed KRW 1 trillion. As of February this year, AUM stood at around KRW 1.357 trillion, a steep 65% increase from KRW 822.7 billion a year earlier.
Fint, operated by December & Company, has grown on the back of demand for small-ticket investing. On Fint, a minimum of KRW 200,000 in investable funds is enough to try robo-advisor-based investing easily and conveniently through the app. Services such as "Steadily Reach Your Goal" and "Steadily Bit by Bit," installment investment services for university students and young professionals for whom a lump-sum investment is still daunting, have drawn attention and driven a sharp rise in membership. Three years after launching the service in 2019, cumulative membership passed 700,000 this year.
AIM, the first mobile wealth management app, also deserves a mention. It was founded in 2015 by CEO Jihye Lee, known as "Citigroup's first Korean quant analyst." Drawing on her experience on Wall Street, Lee developed the AI wealth management algorithm "Esther." It operates by diversifying across some 12,700 global ETFs in 77 countries worldwide to minimize risk. As of February this year, membership stood at one million and cumulative contracted amounts reached KRW 730 billion.
Beyond individuals, there are also many robo-advisor startups that provide investment advisory or design AI solutions for established financial companies. Qraft Technologies ("Qraft"), founded in 2016, is a leading example. Measured by cumulative investment raised, it stands above every other robo-advisor startup, having attracted more than KRW 210 billion to date. In particular, it drew KRW 175 billion in January this year from SoftBank Group, led by chairman Masayoshi Son, and made headlines as "SoftBank's second investment in a Korean company after Coupang."
Qraft provides a service that runs exchange-traded funds (ETFs) on the basis of robo-advisors. It was the first Korean company to list an ETF run 100% by AI on the New York Stock Exchange (NYSE) in the United States. It has four active ETFs listed in total, including AMOM (ticker), a US large-cap momentum ETF, and HDIV, which holds US large-cap high-dividend stocks. AMOM in particular drew attention from investors worldwide as the "Tesla whisperer" after it accurately predicted the movement of Tesla's share price last year.
Quarterback Group is likewise a startup better known for designing financial products than for personal wealth management. It is regarded as the elder statesman of the robo-advisor industry. Its in-house AI algorithm QBIS was the first to pass the "robo-advisor test bed" run by the Financial Services Commission (FSC) and Koscom. It currently provides financial services to some 20 institutions, including banks and insurers. It manages investment funds directly and also runs funds containing equities, ETFs and more. Well-known examples include the Theme Rotation Wrap, a wrap account product launched with Korea Investment & Securities, and the Kiwoom Quarterback EMP Global Robo-Advisor Fund, developed in collaboration with Kiwoom Asset Management.
Bulio, led by CEO Youngrok Chun, is in a similar position. Its flagship product is the Kiwoom Bulio Global Multi-Asset EMP Fund, launched together with Kiwoom Asset Management. The product analyzes data on some 1,900 US-listed ETFs and diversifies across about 30 of them, and it has been performing well with a two-year return in the 11% range.
Fintech solution support
The fintech companies that make fintech
For a single fintech service to come into being, countless technologies and pieces of infrastructure have to be in place behind it. From data collection and analysis through authentication and program design, the list goes on. That is why there are quite a few startups supplying the technology, infrastructure and solutions that let others offer fintech services. They are, in effect, "fintech companies that make fintech companies."
COOCON provides the "application programming interfaces (APIs)" that let financial companies and fintech startups use financial and public data more easily and conveniently. COOCON collects data from some 500 financial and public institutions in Korea, as well as from some 2,000 financial institutions in about 40 countries abroad. Today a great many financial companies and fintech firms use COOCON's APIs. Take "loan product comparison services" as an example: companies such as Kakao Pay, Toss and Finda use COOCON APIs to deliver them. More recently, COOCON also supported the build-out of easy transfer and payment services for Danggeun Pay, a subsidiary of Danggeun Market.
Adena Software sells and supplies financial trading software it develops in-house to foreign exchange margin trading (FX) and payment settlement companies worldwide. Most of its revenue comes from overseas. Its main customers are global foreign exchange liquidity providers (LPs) in the UK, Switzerland and elsewhere, along with overseas FX futures firms. Unlike existing vendors that simply sold programs, it structured its revenue model to take fees in proportion to trading volume. Last year it acquired Coinness, a cryptocurrency investment information platform, expanding into the virtual asset market.
Blockchain fintech startup ICONLOOP is expanding its cooperation with the financial sector through blockchain decentralized identity (DID) technology. DID technology is an authentication method in which identity information, once verified, is encrypted and stored on the user's smartphone so that it can be used whenever personal data needs to be submitted. Back in 2020, ICONLOOP worked with Shinhan Bank to commercialize Korea's first DID service used in the financial sector. ICONLOOP has also drawn public attention recently in connection with the presidential election, after ICX, the cryptocurrency ICONLOOP helped develop, was classified as a "Yoon Suk-yeol theme coin" and its price jumped. President-elect Yoon issued a guest book bearing his handwritten signature as an NFT last December, and Craft, an NFT marketplace built on the ICON blockchain, was used for it.
Amending the Electronic Financial Transactions Act and easing network separation rules need to move faster
Interview with Geunju Lee, Chairman of the Korea Fintech Industry Association (and head of the Korea Easy Payment Foundation)
Q Where does Korea's fintech industry stand compared with the rest of the world?
The technology itself ranks with the best in the world. But fintech capability is not simply proportional to technical prowess. Because the financial business is itself a "regulated industry," the level of regulation ultimately determines a country's fintech standing. I do believe the government has a clear will to ease fintech-related regulation. The discussion, however, is slower than expected. An amendment to the Electronic Financial Transactions Act aimed at easing a number of regulations has been proposed, but it remains stalled.
Q What are the main regulations that fintech startups actually feel?
The "mandatory network separation rule" is the leading example. Network separation is a regulation requiring internal business networks and external internet networks to be kept apart in order to prevent hacking. Because the networks are separated, developers cannot properly make use of the excellent development software and code that is freely available on the internet. It also does not fit a working environment where remote work has become routine, as it has these days. Developers are already hard to find, and a great many of them leave the fintech industry after hitting the limits imposed by network separation. itself ranks with the best in the world. But fintech capability is not simply proportional to technical prowess. Because the financial business is itself a "regulated industry," the level of regulation ultimately determines a country's fintech standing. I do believe the government has a clear will to ease fintech-related regulation. The discussion, however, is slower than expected. An amendment to the Electronic Financial Transactions Act aimed at easing a number of regulations has been proposed, but it remains stalled.
Q What efforts are needed to resolve the fintech regulation problem?
"Activating channels of communication" has to come first. Regulation related to fintech can be eased by coordinating views with the incumbent financial sector — the "big banks" — and with the relevant government ministries. What matters here is that a "communication channel dedicated to small and mid-sized fintechs" is absolutely necessary. The FSC's "Digital Finance Council," currently made up mainly of big banks and big tech, inevitably leaves the voices of small and mid-sized fintechs on the sidelines. A sense of crisis and unease has spread across the industry that "if the level of regulation gets locked in based only on big tech's circumstances, small and mid-sized fintechs cannot survive."
Q Beyond easing regulation, policies to nurture the sector must matter too.
There are two keywords that are "hot" right now when it comes to nurturing fintech. The first is "overseas expansion." In keeping with the era of the COVID-19 pandemic, we need to put in place the environment and systems that let companies enter global markets. The second is "blockchain." Blockchain is a core next-generation technology, and plenty of blockchain-based fintech services are already coming out. Separate from the controversy surrounding the cryptocurrency market, there is a need to actively nurture blockchain technology and the industries around it.
- Source: Maekyung Economy
- Original article: https://www.mk.co.kr/economy/view/2022/229361
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