Competition between banks and big tech casts a shadow on a government-backed loan exchange platform

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The government’s plan to bring lending products on a single platform by October to help consumers easily compare available options is facing headwinds from traditional banks and their tech rivals in their already intensifying competition to win digital finance.

The ‘Mobile Loan Exchange Platform’, promoted by the Financial Services Commission, which makes the policy since January, is a mobile application that allows debtors to view the number of loan products available and easily transfer their current loan loans to those with a lower interest rate. without having to visit offline branches of banks or other financial institutions.

The new contactless service, operated by major tech and fintech companies in collaboration with the Korea Institute of Financial Telecommunications and Clearing, an FSC non-profit organization that operates several interbank payment systems, is expected to expand consumer access to financial services, FSC said.

Despite good intentions, the government ran into difficulties as traditional banks are skeptical about the project, citing high fees they might have to pay tech players to participate in the platform, according to industry sources.

In addition, banks are reluctant to share customer information with the large tech and fintech companies that are needed to run the loan exchange program, out of concerns about the possibility of leaking their trade secrets or confidential inside information, they added.

The FSC responded to the objection of local banks by stating that “banks will play an important role in the implementation of the platform. We will take into account the opinion of the banking sector when choosing technology companies to work with the platform. “

“Banks and big tech companies showed power struggles when FSC tried to launch the current open banking system in 2019, but the system was ultimately well-established in the marketplace. Both parties should consider the upcoming loan exchange platform from the consumer’s point of view. “

The country’s five major lenders – Shinhan, KB Kookmin, Hana, Woori and NH NongHyup – are currently not considering joining the government loan exchange platform. Meanwhile, the Korean Federation of Banks, the representative body of 60 banks operating in Korea, plans to develop a separate platform for exchanging loans in response to attacks against large tech and fintech companies.

However, a number of online lenders, including KakaoBank and Toss Bank, have chosen not to merge with the KFB, fueling an ongoing feud over the loan exchange platform.

As traditional banks and their tech rivals push for separate mobile credit-swapping services, rumors are growing that the government may delay the launch of the planned platform slated for October.

“Given the growing concern of banks about the scheme of the loan exchange platform, the financial authorities should not insist on it unilaterally. They need to develop concrete measures to ease the burden on banks, including fees, in order to successfully achieve their original goal, ”said Kim Sang Bong, professor of economics at Hansung University.

By Choi Jae Hee (cjh@heraldcorp.com)



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