In a new report, the Bank of Korea has said that non-financial companies will play a bigger role in the country’s financial sector with the continued growth of digital banking technology, Korea Joongang Daily reported.
“Nonfinancial institutions that have the technology will play a bigger role in businesses such as consumer banking, money transfers and transactions, investments and asset management that are currently mainly run by financial institutions,” the report said. “Digital technology development will improve accessibility to financial services, lower costs and improve the quality of service, and it could help the global economy grow once again as a new growth engine.”
It further said that emerging technologies such as blockchain and artificial intelligence have been introduced in the financial market and more services are being developed around them. According to the bank, new technology would enable more small firms to enter the market, thereby reduce the dependency of the people on a small number of large financial institutions, which would ultimately reduce the possibility of one financial institution or group of institutions leading to a system-wide failure.
“At the same time, new risks will rise, such as those coming from nonfinancial institutions managing people’s privacy,” it noted.
Furthermore, the report urged the government to formulate flexible regulations that will not only facilitate faster growth of technologies for the financial sector, but also create an environment fostering fair competition among fintech firms.
Notably, the BoK also said that it might consider issuing digital currency in the near future to adapt to the changing paradigms in this sector.
“Financial institutions should be open to the paradigm change in the financial market and cooperate with fintech firms to be prepared for digital innovation, while nonfinancial institutions should focus on managing possible risks coming from the digitalization,” the report said.
