South Korea’s Financial Services Commission (FSC), the country’s top financial regulator, has announced its first batch of financial services providers accepted into its financial regulatory sandbox.
Among the 18 fintech solutions selected, three utilize blockchain technology:
- Directional will be testing a stock lending platform based on blockchain technology offering stock lending and borrowing services for individual investors;
- KOSCOM will be testing a blockchain-based financial service that computerizes and updates the list of shareholders of non-listed small and medium-sized enterprises (SMEs) and provides assistance for peer-to-peer (P2P) over-the-counter (OTC) trading of such stocks; and
- Kasa Korea will be testing a blockchain-based financial services platform that issues and distributes mortgage-backed securities (MBS) in a form of electronic securities.
The FSC launched its fintech regulatory sandbox on April 1, 2019, enabling fintech companies and financial institutions to test their new services for a maximum of two years in an environment where certain regulations are exempted.
The 18 fintech solutions that made the cut were selected among more than 100 applications. Alongside the three blockchain solutions, other fintech products accepted into the financial regulatory sandbox’s first batch include:
- Low-cost financial services delivered through mobile technology by KB Kookmin Bank;
- A credit card-based money transfer service using PayFan application by Shinhan Card;
- An online payment service using mobile text message verification by Payple;
- A P2P finance service for local residents to invest in new renewable energy businesses by Root Energy;
- A loan application service running on South Korea’s popular financial services platform Toss that provides fixed-interest rates of various loan products offered by multiple financial firms by VivaRepublica;
- A financial service that provides information of various car loan products based on the car owner’s credit score, accident history, driver information, driving experience, and more, by Fintech Inc.; and
- A financial service that provides credit information based on tax accounting information of SMEs not subjected to external audit and develops credit assessment and risk management models by Douzone.
In January, Choi JongKu, chairman of the FSC, outlined the regulator’s policy priorities for fintech innovation in 2019 at a meeting with fintech entrepreneurs, executives of financial institutions and investors. “The FSC will spare no effort to support fintech companies to come with globally competitive services and spread fintech innovation across the financial sector,” Choi said, adding that this year would be an opportune time for South Korea’s fintech industry to take a step forward.
Alongside the financial regulatory sandbox, other initiatives by the FSC to boost fintech in South Korea include regulatory reforms notably regarding fintech investment, as well as the introduction of an open banking system.
The government has made innovative technologies, including blockchain, one of its top priorities, announcing last year that it would allocate 1 trillion won (US$880 million) in 2019 to boost tech development as part of an overarching economic initiative.
Independently, Seoul launched a five-year plan last year to invest 123.3 billion won (US$108 million) to develop the South Korean capital as a smart city powered by blockchain. In a speech during his visit to Zurich in October 2018, Park Won-soon, the mayor of Seoul, unveiled the Blockchain Urban Plan for 2018-2022, which will cover 14 public services in five area including labor welfare, vehicle history management, certification issuance, donation management and elections voting.