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FinTechs belonging to this area offer traditional banking services in a modern way, usually through online services or mobile applications as well as ancillary services – e.g. enabling customers to manage their giro- or custody-accounts online and in real time or offering e-wallet services. Keywords in this context are also API-Banking or Banking as a Service (BaaS)/ Bank as a Platform (BaaP).
API-Banking:
API stands for application programming interface and is offered to access data banks and to extract and insert information. API-Banking consequently means the access to data banks of banks to offer new and innovative banking applications.
Through these services FinTechs offer services with new functions, e.g. enabling customers to manage their accounts online and in real time.
BaaS – Bank as a Service/BaaP – Bank as a Platform:
The API-based Bank as a Service platform has a full banking licence, but merely serves as the back end for standalone independent FinTechs, which “use” the licence and the back end of the bank to offer new financial services, launch additional financial products or expand into additional markets.
Introduction
Attitude of the country towards online-banking services
In addition to internet banking and mobile banking, contactless services, such as opening bank accounts without visiting the bank in-person, are increasing. Further, open banking systems are recently being implemented, which enable users to look up multiple bank accounts and make payments and transfers using a single application. It is expected that open banking systems will enable FinTech companies to actively enter the financial market, and banks would be able to provide a variety of services, including asset management services for customers and selling financial instruments.
In addition, the operation of online-only banks is accelerating the digital transformation of banking services, and Toss Bank has recently been authorized as the country's third online-only bank.
Legal affairs
Obligations and requirements to provide online-banking services described above
Open banking systems are currently operated by agreements between institutions, and according to the comprehensive digital finance innovation plan regarding amendments to the EFTA, etc., it will lay out the legal landscape for open banking systems, and the amended EFTA currently proposed to the National Assembly includes such provision.
In addition, according to the Act on Special Cases Concerning Online-Only Banks, it is necessary to obtain an authorization to operate an online-only banking business, and if such banking business is operated by means of electronic financial transactions only, only KRW 25 billion is needed as a capital.
Additional comments regarding the legal situation for online-banking services or what FinTech’s must be aware of in this business area
The amended EFTA proposed to the National Assembly is expected to introduce a comprehensive payment service provider system that grants the right to open accounts, which was only held by banks and other financial institutions in the past. As such, it is expected that electronic financial companies that provide a comprehensive payment service system would emerge.
Economic conditions
Market size for online-banking services and biggest companies in this business area
Currently, 18 banks, 62 FinTech companies and 15 securities firms are participating in the open banking system. It is expected that the amount of money being used in the open banking system will reach KRW 314.3 trillion in 2021, an increase of 175 per cent compared to the amount used in 2020, and the number of usage is also expe