[Open Forum] Finance Must Change to Keep Pace with a Rapidly Changing Era

As COVID-19 spread and contactless culture developed, a strong wave of digital transformation swept through the financial sector. People can now check and open bank accounts on their phones, and transfers can be made anytime, anywhere. As data technology has advanced in this way, the era of “MyData” has finally arrived.

With the advent of the Fourth Industrial Revolution, interest in the use of personal data has grown. In August 2020, the “Three Data Laws” (amendments to the Personal Information Protection Act, the Information and Communications Network Act, and the Credit Information Act) came into effect. As a result, it became possible to pseudonymize personal information and use it without consent, or provide it to third parties, including for commercial purposes.

Along with the Three Data Laws, the financial sector began offering “MyData” services. MyData refers to a series of processes in which individuals, as the subjects of information, actively manage and control their own data and use it proactively in their lives for credit management, asset management, and even health management. Individuals can gather and manage information scattered across various financial companies in one place and make use of their personal data.

MyData services had previously been provided in other forms, such as open banking, but they were fully launched only this January. The evolution of MyData is divided into “analysis and recommendations” (stage 1), “real-time support” (stage 2), and “prediction and response” (stage 3). Korea is currently at stage 1, where services are limited to customers’ financial information such as deposits, loans, insurance, and cards, and financial companies or fintech firms merely analyze that information. By contrast, Europe and the United States have already reached stage 2 of MyData services and are now preparing for stage 3. Korea launched MyData services this January and remains a step behind other countries.

In Europe and the United States, MyData services are already being used swiftly and actively. U.S. bank Wells Fargo has launched a platform focused on debt management to help customers manage their credit ratings. Each month, it links with individuals’ financial activity data to suggest ways to improve their credit ratings and displays changes in rating tables through graphs. Dutch bank ABN AMRO has introduced a “subscription” service in partnership with other industries. It organizes and displays users’ subscription services and payments, and allows unused services to be canceled directly through the bank’s application. In this way, global banks are quickly widening the gap by partnering with other industries as well.

The reason Korea’s MyData service development has been slower than that of other countries is the impact of regulation. The profits that can be generated through the MyData business are still minimal. However, because Korea’s financial authorities have regulated the range of financial products that financial companies and fintech firms can sell under the Financial Consumer Protection Act, banks have been reluctant to proceed with services due to risk concerns. In addition, although the authorities claimed to be protecting financial consumers through regulation, they significantly lowered the usability of MyData services and hindered the pace of financial service development. As a result, the benefits to financial consumers did not increase.

At present, big tech firms have entered the financial industry through the Electronic Financial Transactions Act and the Internet Bank Act, but banks’ entry into non-financial sectors remains limited. Big tech firms can secure both financial and non-financial data, but information provided to banks by big tech is only in broad categories and lacks meaningful detail. Another problem is that fair competition between big tech firms and banks has not been achieved.

Government authorities must pursue more active deregulation to improve banking services. They should relax principles such as “same function, same regulation” to allow access to a wider range of information and expand partnerships across different industries. At the same time, each bank should take the lead in actively developing services and enhancing financial consumer convenience by referring to overseas banking cases in order to keep pace with the rapid changes of the times.

Hyunji Noh, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 빠르게 변화하는 시대에 걸맞게 금융도 변해야

Author: Hyeon-ji Noh

Date: 2022-06-03

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=8&idx=24779