The digital revolution is changing our world. Despite advancements, one concern remains eternal: security. We examine how such trepidation impacts fintechs in South Korea.
South Korea has one of the highest mobile penetration levels in the world and this enthusiasm shows no sign of abating. The smartphone market is predicted to grow from 39.5 million users in 2017 to 43.43 million by 2022, according to statistical portal Statista. This eagerness spans generations and economic backgrounds. This translates in to a highly connected mobile society, impacting consumer behaviors and expectations. This is why South Korea is a hugely important country for G+D Mobile Security, reflected in the company’s December 2016 investment in Hansol Secure, part of the Hansol Group. By providing mobile platforms, and working with its two largest telcos, SKT and KT, G+D Mobile Security is well aware that South Korea is a country of opportunities.
Room to expand in mobile payments
M-Commerce now accounts for more than half of all retail B2C e-commerce; the latest figures published by Statista show that the market is expected to reach US$35.41 billion by 2019. The growing familiarity of digital transactions for users is spilling in to other sectors. The opening up of a peer-to-peer (P2P) transfer market with South Korea’s Viva Republica’s platform, Toss, has successfully transferred over US$3 billion since its inception in early 2015. It now moves US$400 million each month. This is only set to grow, with fresh investment of US$48 million from investors, including PayPal. The recently launched digital-only Kakao Bank originated from messaging app, KakaoTalk. It signed up more than 1 million users in its opening five days and boasts 14 million members on its Kakao Pay mobile payment service. Impressive though the South Korea figures appear, to put them into a worldwide perspective, the Financial Times (FT) recently noted that “the value of Chinese third-party mobile payments more than tripled to Rmb38tn (US$5.5tn) in 2016.” Mobile payments in the US rose 39 percent in 2016, but still only reached US$112bn in 2016, says the FT. While clearly there is much room to expand in regard to mobile payments in South Korea, at an infrastructure-level, the country currently leads the field in 4G LTE internet download speeds. This is to be further enhanced with the much-heralded arrival of 5G mobile. The increased speeds will open the door for virtual reality and expand possibilities for IoT-connected devices.
successfully transferred by Toss since its inception 2015
Fintech adoption In spite of South Korea’s celebrated love of technology, it would be a mistake to paint it in overly simplistic terms. For example, the latest global data from EY (Ernst & Young) reports that in 2017 “the average percentage of digitally active consumers using FinTech services reached 33%”. The report noted, however, that South Korea’s fintech adoption rate was a just-below-average of 32%. Similarly, on the one hand, the South Korean government has a stated intention for the country to go cashless by 2020. On the other hand, research tells us that the financial behavior of South Koreans is shaped by their addiction to plastic: credit cards (in contrast, credit card penetration “in China is small compared to that of developed markets”, says the FT). They have one of the highest usage rates globally and part of the challenge, therefore, for fintech companies, is to continue to transfer this plastic attachment to the digital world. Consumers have identified security issues as hampering their enthusiasm for the segment.
South Korean government wants to go cashless 2020.
With a history of high-profile data hacks on South Korea, probably boosted by the geopolitical situation, the challenge is for technology companies to address their concerns. An ideal solution is G + D Mobile Security’s Trusted Application Kit (TAK), an application security framework for mobile operating systems, such as iOS and Android. TAK provides advanced security to apps for mobile payments, for example, and is non-intrusive to end-users. The future of South Korea fintech is one of growth and expansion. Ensuring data security will be a considerable step towards creating an unstoppable momentum.