[Initial Perspective] A Facet of the COVID-19 Era... 'Digital Transformation' Critical for Financial Companies' Survival

[Image source=Yonhap News]

[Asia Economy Reporter Jo Gang-wook] Recently in the United States, the Korean drama 'Reply 1988,' which aired five years ago in Korea, has gained great popularity. In Japan, 'Crash Landing on You' sparked a syndrome with an explosive response. Even the Japanese Foreign Minister said in an interview, "I watched it all." While the excellence of the content itself was the foundation, it is interpreted that the extended time spent at home due to the spread of the novel coronavirus infection (COVID-19) also played a role.

Also, BTS, who topped the US Billboard main singles chart for two consecutive weeks, held their first online paid concert 'Bang Bang Con The Live' in June. About 756,600 people from a total of 107 countries including Korea, the US, the UK, Japan, and China paid to join the performance. It is known that they earned about 30 billion KRW through ticket sales and related merchandise sales during the 90-minute performance. This new growth engine model in the untact era attracted much attention not only from overseas media but also from the political sphere.

Reply 1988 / Photo by 'Reply 1988' official Facebook screen capture

This is one aspect of the changes occurring worldwide due to COVID-19. Not only in cultural and artistic fields such as dramas and music but also the landscape of industries around the world is changing. Hana Financial Management Research Institute forecasted in its '2021 Industry Outlook Report' released on the 7th that the growth of untact (non-face-to-face), digital, and low-carbon industries will stand out next year.

In particular, significant changes caused by COVID-19 are strongly felt even in the financial industry, which forms the foundation of all industries. Digital transformation centered on untact is being demanded more strongly than ever. In fact, banks have been striving for cost reduction and discovering new revenue sources through digitalization for several years. There was a consensus that digital finance will inevitably become the mainstream in the future.

However, it has now changed from a simple forecast to a matter of survival. The fate of financial companies depends on how quickly and conveniently they can welcome consumers online. Due to COVID-19, the number of customers visiting bank branches has decreased, and the expansion of untact sales has become inevitable, making it necessary to accelerate the construction of digital finance.

Chairmen of holding companies overseeing banks, card companies, insurance, securities, and other financial firms are also calling for digital innovation and personally managing the digital transformation of the entire group. Shin Yong-byeong, Chairman of Shinhan Financial Group, established a 'Loonshot organization' directly under the chairman within the group to lead the construction of a new digital platform. Yoon Jong-kyu, Chairman of KB Financial Group, after confirming his third term last month, expressed his ambition to "maintain the title of the number one financial group through digital platform differentiation," and Sohn Tae-seung, Chairman of Woori Financial Group, prepared a second office at Woori Financial Namsan Tower and showed his determination to lead digital innovation.

The aggressive moves of 'Big Tech' companies such as Naver and Kakao, and 'Fintech' companies like Toss and BankSalad, which are shaking the positions traditionally held by banks and other financial institutions, are also reasons why these chairmen are directly involved. With the government's 'Fintech promotion policy' backing the full-scale entry of Big Tech into the financial industry, it has become a matter directly related to survival. Due to the nature of the financial industry, traditional financial sectors, which have been tied up by various regulations, are demanding the elimination of discrimination against Big Tech, which receives regulatory exemptions.

Was this situation unexpected? The financial authorities only launched a public-private joint consultative body last month to mediate conflicts between the financial sector and Big Tech, but difficulties continue. The times are changing rapidly, and COVID-19 has pressed the accelerator. The anxious gaze at this life-or-death crisis contains regret over the government's delayed response.

This content was produced with the assistance of AI translation services.