Financial Industry Competition Assessment to Be Revised from the 'Consumer' Perspective

Formation of the 3rd Financial Industry Competitiveness Evaluation Committee

The method of evaluating competition in the financial industry will shift from the existing sector-centered approach to a 'consumer'-centered approach. This change is based on the judgment that the current method, which assesses concentration based on market share, makes it difficult to accurately determine the competitive landscape as experienced by financial consumers.

Kim So-young, Vice Chairman of the Financial Services Commission, is giving a briefing on "Measures to Improve Banking Sector Management, Business Practices, and Systems" on the 3rd at the Government Seoul Office in Jongno-gu, Seoul. Photo by Yoon Dong-joo doso7@

On the 19th, Kim So-young, Vice Chairman of the Financial Services Commission, attended the 3rd Financial Industry Competition Evaluation Committee meeting held at the Government Seoul Office in Jongno-gu, Seoul, and stated, "Starting from the newly launched 3rd Financial Industry Competition Evaluation, we aim to examine whether the principles of competition are functioning well from the perspective of consumers who use various functional aspects of finance, rather than from the viewpoint of a specific sector."

The Evaluation Committee has been operating since 2018 to promote competition and innovation within the financial industry and to enhance the reliability of entry policies. The committee members, who will serve for the next two years, consist of 11 members recommended by related organizations, and seven members, including Lee Hang-yong (professor at Hanyang University), attended the first meeting.

At the meeting, the committee decided to improve the evaluation method starting from the 3rd competition evaluation. Previously, market concentration was assessed using the number of market participants within the same sector, the Herfindahl-Hirschman Index (HHI), and concentration ratios (CR), but these methods were criticized for not reflecting changes in the new financial environment, such as the entry of technology companies into the financial industry.

Vice Chairman Kim said, "We will improve the method of evaluating competition, which has focused on market concentration indicators of specific sectors," adding, "From the perspective of specific customer groups such as low- to medium-credit borrowers, we will comprehensively analyze various detailed indicators such as market concentration, profitability, and regional status across sectors that provide or perform similar products and functions."

Accordingly, the committee plans to first evaluate the competitive status of banks, savings banks, mutual finance, card and capital companies participating in the small and medium-sized enterprise and low- to medium-credit borrower loan markets related to the financial capital supply function next year. To this end, a research project for basic data analysis will also be conducted during this year.

Additionally, the committee considered suggestions to improve the evaluation methods for the insurance and credit card sectors raised during the 2nd evaluation. Therefore, from this evaluation cycle, the evaluation target market will be flexibly defined based on customer groups, products/services, and market participants.

First, customer groups with different characteristics, such as individuals versus corporations and large enterprises versus small and medium enterprises, will be distinguished considering that substitution between products is not possible. The financial products or services used by the distinguished customer groups will be regarded as a single market subject to evaluation, and if necessary, the market can be further segmented by geographic distinctions or customers' credit ratings to analyze competition.

Furthermore, in situations where collaboration between financial companies and platforms is expanding, such as the launch of deposit, loan, and insurance product brokerage services and the establishment of refinancing loan infrastructure, product sales channels can also be included as factors considered in the competition evaluation process.

On the other hand, in cases where sector-specific evaluation is appropriate, such as credit rating services that target specific customer groups and have no other sectors providing similar services, the existing evaluation method can still be applied.

Vice Chairman Kim emphasized, "For the new evaluation method to function properly, it is necessary to integrate products from various financial sectors into a single market and distinguish similar customer groups according to detailed characteristics, so the insightful input of committee members must be generously reflected," adding, "The authorities will also boldly improve the system to ensure that the committee's proposals lead to effective results."

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