The State of FinTech in South Korea

 In Fintech, Startup Thought Leaders

Situated in East Asia, South Korea has emerged among the most affluent Asian countries in the last four decades after being proclaimed a Republic in 1948. It occupies the southern part of the Korean Peninsula and the only country it shares its boundary with is North Korea. Rest of the country is surrounded by 2413 km of coastline on three sides ? the Yellow Sea in the West, the East China Sea in the South and Sea of Japan in the East.

According to an estimate, the population of South Korea was 51,069,000 as on November 2015, out of which 49.5% people live in Seoul capital area. The census shows a trend of continuous low-birth and more aging population. 2.7% of the total population is foreigners, and more than half of the foreign nationals are Chinese.

The employment-population ratio in South Korea was 61% in August 2016, which is up 1.5% from the last year. South Korea claims 100% literacy rate.

According to the data of the Statistics of Wire and Wireless Telephone Subscribers (Ministry of Science, ICT, and Future Planning), in 1990, 80,000 people were using mobile phones and the subscription rate was 2 per 1000 person. In 2014, mobile users went up to 57 million, and the subscription rate was 113 per 1000 person. Smartphone users were 7 out of every 10 mobile users.

Today, the government claims to have highest broadband penetration in the world, i.e., 97%. Home to some leading companies such as Samsung and Hyundai, South Korean innovation has earned accolades from across the globe.

Startup Scene in South Korea:

South Korea has posed a challenge for India and China in setting up the healthiest startup eco-system among the Asian nations. With the government’s initiative and sound foreign investment, the startup scene is up and thriving.

From 2000 startups in 1999, the figure went up to 30,000 by the end of 2014; with 63 ranked number 1 regarding the market share in their respective sectors.

What make the prospect of startup scene brighter are the government’s $3 billion investments in the promotion of tech innovation. Bloomberg has adjudged South Korea as the most innovative country for factors such as R&D intensity, the high concentration of researchers, productivity, etc. and this shows the country’s commitment to nurturing new ideas.

Among all the startup’s sectors, e-commerce tops the list with players such as Coupang and YelloMobile. Since 2014, Coupang has topped among all independent tech startups regarding its high valuation. It is valued at US$5 billion, and its total funding stands at $1.4 billion.

Gaming and food tech come second and third respectively regarding growth and valuation. Startups in other sectors such as hardware, transportation, FinTech, ad tech, marketplace & platforms are also making a significant contribution to the country’s innovative initiatives. Digifi in hardware, 4:33 Creative Lab and Carbon Eyed in gaming, Baedal Minjok and Yogiyo in food tech, Zigbang in Marketplace and Platform, Socar in transportation, Viva Republica (Toss) in FinTech, IGA Works in Ad Tech are some of the leading startups in their respective sectors.

How big is the FinTech pie in South Korea:

According to, the transaction value in the FinTech market in South Korea amounts to US$ 45,429 million in 2016. Statista estimates that the transaction value will have an annual growth rate of 19.9% and at this rate, the total transaction value in 2020 would be US$ 93,808 million, which, according to experts, is quite a decent growth as compared to other Asian countries.

Among the fastest growing FinTech firms are Viva Republica, GUMOisland, Newsystock, Rainist, D3, Korea Credit Data, Infosonic, etc. to name a few.

Established in August 2013, Viva Republica launched its FinTech concern, Toss, in February 2015. Toss is a mobile application, which transfers money in three simple steps whereas the traditional financial institutions have complicated procedures which customers often find quite difficult to fulfill. While GUMOisland deals with information technology, Newsystock provides Robo-Portfolio platform to make people understand investments and take a rational decision.

Segments of FinTech in South Korea:

Digital financial services and alternative financial instruments are two leading segments among FinTech companies in South Korea. Peer-to-peer payments, Digital payments, e-wallet, mobile payments, cross-border & digital commerce transactions have a lot of growth scope. The government is also encouraging people to go cashless and use as much credit cards as possible.

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Reports suggest that out of all the payments 80% are made through cards and rest 20% with the cash amount. The central regulator is working on a plan to put in place a system of 100% electronic transaction for all payments by 2020. This has provided an uphill task to the government and to make this plan a time-bound success; financial technologies companies should come forward, introducing innovation in a big way.

Despite all efforts and encouragement from the government, segments such as crypto-currencies and Blockchain technology are yet to make impressive growth in the country.

Status of policy regulation in South Korea for FinTech startups:

In a recent policy relaxation, a non-financial firm was allowed to hold up to 50% stake in internet-only banks. This move is expected to encourage the internet-only banking and innovations in digital finance. The Financial Service Commission, a government body responsible for financial policy and supervision, is in the process of identifying such regulations, which are holding back the growth of FinTech firms. The purpose is to look for ways to relax these norms without compromising the security measures.

Besides regulatory reforms, the significant growth of FinTech startups in South Korea can primarily be credited to the number of initiatives that government has taken. Global entrepreneurship program at higher education institutions, opening new research institutes, the good budgetary allocation for startups are steps that government has taken to support innovations.

The government also amended that law which barred venture capitalist from investing in startups. Today, due to change in law, accelerators are funding entrepreneurs working across a range of sectors.

To promote regulatory cooperation through exchanging information about innovations in the field of financial services, the South Korean government has started collaborative with other FinTech leading nations to leverage the benefit of innovative technologies in their country.

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It has formed a FinTech bridge with the United Kingdom. While the UK feels that its position as the FinTech capital of the world has been threatened by the Brexit vote, South Korea believes that it’s a newcomer in FinTech and it needs support from a country like the UK.

Incubation scene for startups in South Korea:

Since 2010, when Daum, the second largest web portal of South Korea, launched first accelerator Primer, more than 40 accelerators and incubators of international standards have come up in the last couple of years in the country. Some of the leading accelerators are SparkLabs, KSTARTUP and FT Accelerator.

In April 2015, Google started Campus Seoul to stimulate and mentor local innovators. Networking events by business leaders and the government such as Startup Weekends, Startup Alliance, beLAUNCH etc. are bringing entrepreneurs and investors together so that they can benefit each other. Accelerate Korea is the first public-private partnership with international collaborations and partnerships for the tailored program.

South Korea’s Ministry of Science, ICT and Future Planning (MSIP) has also partnered with Seoul-based accelerators such as ActnerLab, DEV Korea, SparkLabs and Shift recently launched K-Startup Grand Challenge to support foreign startups with a purpose to bring diversity in innovation.

Current status of financial institutions in South Korea:

With Bank of Korea as a lead authority for price stability, South Korea has all types of financial institutions such as government-run banks, local banks with regional dominance, foreign banks and other non-banking organizations indulged in financial transactions.

Besides the Bank of Korea, the Financial Service Commission has the statutory mandate to make the financial laws and regulations. The regulator is making every effort to promote financial institutions to adopt new the financial technologies and eliminate friction between traditional banks and emerging FinTech companies. Permission for Internet banking is one such effort.

In a recent move, the government is planning to allow banks to build the database of financial information of consumers, which can be accessed through Application programming interfaces (APIs). Korea Financial Telecommunications and Clearing Institute and Koscom Corporation will manage this database and at present 16 banks and 25 brokerage firms have come together as partners in this initiative.


The most active feature in a FinTech revolution in South Korea is the pivotal role of the government, which is acting as a major catalyst. The country understands that FinTechs will change the fate of the nation. It is gearing up with policies, regulations, and investments to compete with the most developed FinTechs destinations in the world.

Retail Banking, Lending and Financing, Payments and Transfers, Wealth and Asset Management, Markets and Exchanges, Insurance, Blockchain Transactions are the important focus areas for FinTechs in South Korea.

Alex Kong

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