95% of South Koreans have access to the internet. Mobile phones are overwhelmingly the most common means of accessing the Internet in the market, and the high uptake of Open Banking in South Korea has been driven by the ubiquity of mobile banking apps. Real-time data sharing is facilitated by South Korea’s global leadership in 5G deployment.
While it is centrally operated by the government, it is market-driven with no formal or compulsory Open Banking regime. South Korea follows other countries in debunking the supposed dichotomy between mandated regulation-led approaches and optional market-led approaches, treating them as two ends of a spectrum rather than an either/or choice. South Korea’s MyData regulation covers data access and some transaction initiation, while most transaction initiation will remain market led until MyPayment is introduced. In addition, the core APIs mandated by the FSC coexist with other private APIs established independently by participants.
As of September 2020, 22 million customers, or more than half the adult population of South Korea, were using some form of Open Banking. However, the numbers are expected to rise with the forthcoming MyData initiative.
Consumers are able to access a wide range of financial services, from payment to money transfer to loans to spending pattern analysis to product comparisons using a single platform. Aggregation apps that allow customers to see all their bank account and credit card information in one place are popular in a country with an almost entirely banked population where each adult has 7.8 payment cards on average. DIY credit cards, which allow customers to personalize card benefits through slick apps, have further primed the market for Open Banking. Automated spend analyses already assist customers with this form of personal financial management (PFM). In a virtuous loop, Open Banking looks set to make that automation even more sophisticated.
South Korea is debunking the supposed dichotomy between mandated regulation-led approaches and optional market-led approaches, treating them as two ends of a spectrum rather than an either/or choice. South Korea’s MyData regulation covers data access and some transaction initiation, while most transaction initiation will remain market led until MyPayment is introduced. In addition, the core APIs mandated by the FSC coexist with other private APIs established independently by participants.
Open Banking is expected to encourage competitive cooperation in the financial sector, tearing down barriers among banks or between banks and Fintechs, which will reshape the financial services landscape and bring more dynamics to the financial ecosystem. Open Banking is expected to lower barriers for Fintech firms as it lowers cost burdens and allows easier access to payment networks. Banks and Fintechs are expected to form partnerships and come up with innovative solutions.
Korea is a top player in emerging digital technologies, with an outstanding digital infrastructure and a dynamic ICT sector. 5G has been introduced nationwide earlier than in any other country in the world and has spurred numerous projects supported by the government to enhance competitiveness, innovation and the quality of life: smart factories, smart grids, smart healthcare, smart cities, smart roads. The digital gap between SMEs and large enterprises is wide because SMEs face obstacles to the adoption of advanced technologies, like cloud computing and big data: lack of innovation, lack of information and funds, lack of skilled workers and low access to training. This digital gap creates wide productivity gaps, weighing on economy-wide productivity, which is far below the OECD average. Moreover, the digital gap between generations is the highest among OECD countries
South Korea has taken active steps to bridge the digital skills gap. For instance, the engineering gap for skilled AI talent, has been addressed by starting new AI schools.
Korea Financial Telecommunications and Clearings Institute (KFTC) has an Open Banking testbed.