Samjong KPMG "Active Entry of Non-Financial Companies like Big Tech and Fintech into Electronic Financial Services"

56.1% Selection Rate of Easy Payment Options in Internet Shopping

The financial industry structure is rapidly changing with the acceleration of digital transformation in financial companies, technological advancement in non-financial companies, and the expansion of platforms.

Samjong KPMG published a report titled “The Frontline of Digital Finance: The Evolution and Key Issues of Electronic Financial Business” on the 17th, examining the evolution and key issues of electronic financial business and suggesting response directions for stakeholders within the industry.

Online shopping transaction volume increased from KRW 94.2 trillion in 2017 to KRW 209.9 trillion last year, growing at an average annual rate of 17.4%. The share of simple payments during internet shopping rose from 39.6% in 2019 to 56.1% last year, an increase of 16.5 percentage points, reflecting the normalization of non-face-to-face transactions and the expansion of electronic financial service usage.

Among non-financial companies registered as electronic financial business operators, simple payment and simple remittance services are leading the electronic payment service sector. Meanwhile, business trends include ▲ expansion of personal financial service areas by big tech through financial MyData and technological advancement ▲ launch of specialized services targeting corporations and small business owners ▲ electronic financial services related to foreign exchange.

As consumer use of electronic financial business grows actively and various non-financial operators enter the electronic financial business, various issues have also emerged.

Debates continue regarding the appropriateness of simple payment fee rates for small and medium-sized merchants. Revisions to the Electronic Financial Transactions Act, focusing on reflecting changes in the non-face-to-face environment, activating digital finance entry by non-financial operators, and protecting users, are being reconsidered. Prepaid recharge funds, popular for securing loyal customers and offering discounts and rewards, have raised concerns about user protection, emphasizing the need for regulatory strengthening such as mandatory protection measures for prepaid recharge funds. Additionally, IT risks in electronic finance, such as data center failures, system overloads, and information leaks, have been highlighted, prompting ongoing efforts by financial authorities to ensure the safety of the electronic financial market.

The report forecasts that with the introduction of the right to request personal data transmission, MyData services will be implemented in various fields such as healthcare and distribution in the future. It expects that data integration across financial and non-financial sectors will accelerate the Big Blur phenomenon.

Existing financial sectors need to enhance customer experience through the advancement of financial services that incorporate their strengths and know-how, and consider partnerships with big tech, fintech, and players from other industries. In addition, from a mid- to long-term perspective, efforts such as advancing fraud detection system (FDS) scenarios and securing dedicated personnel should be made.

For the non-financial sector, providing services with safety in mind is important. While electronic financial business operators have improved payment convenience by launching simple payment services, issues such as undifferentiated business models among services, excessive marketing costs, and big tech market monopolies have also arisen. Furthermore, concerns about IT risks have expanded due to incidents like the Merge Point scandal and data center failures, necessitating strengthened management for user fund protection, cybersecurity, and personal information protection.

Jae-bak Cho, Head of Digital Division at Samjong KPMG, said, “Securing competitiveness in electronic financial business, the frontline of digital finance, is an important task for related stakeholders amid the activation of the platform economy, untact consumption culture, and data openness trends.” He added, “Existing financial sectors should provide optimal financial services to customers based on their core competencies while considering cross-industry partnerships to transform into lifestyle financial platforms. Non-financial sectors need to consider expanding their business scope by offering customer-centric services using various non-financial data, and business models such as B2B (business-to-business) and B2B2C (business-to-business-to-consumer), which combine business-to-business and business-to-consumer transactions.”

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