How the Korean Financial Sector is Changing

Hajon Lee

As you probably know I am a financial business major and have dreams of pursuing a career in the sector of finance. I have recently been noticing the changes in the financial sector and also attended a lecture on such topic.

So what is finance exactly? Money. That could be an answer. It’s the flow of how the economy operates. That could be an answer. From the talk I heard, the answer he gave out was “a reasonable promise”. Finance is something we can’t see; it’s an intangible asset. Yet it is in our daily lives, everything we do and the things we encounter are related or a part of finance.

There are four main sectors that make up finance. It’s called the four SAs in Korean. The bank, investment company, insurance company, and credit card company. We usually discard the credit card company as it doesn’t have much as it is a red ocean. Research shows that an average person in Korea has 4.6 cards, so there is no way credit card companies can earn an sustainable amount of money from the use of card fee. So let’s take a look at the three main businesses of finance.

Covid-19 has transformed the landscape of finance drastically. The bank earns their revenue by loan deposit margin, however situations have changed. The base rate has been lowered which in turn decreased the loan rate. This has led people not putting money in the bank. Furthermore due to the development of fin-tech the situation for banks has gotten harder.

Next is investment or so called security companies. They gained their profit from the fee people paid when trading stocks. As you might know the Korean financial market is still very stagnant, the most valued 100 companies of Korea put together are worth less than Amazon. In American, 8 of 10 people do stocks which is very contrasting to Korea.

Lastly, insurance companies earn their profit by the money they get constantly. However, all these sectors are facing a challenge because of the pandemic at the moment.

So how have the sectors been adapting to such changes? As you may already know, most of the companies are chaebol families. Therefore what is happening right now is financial grouping in order to minimize the employees and fixed cost that is being given out. Also, the advantage of this grouping is that they can do cross-sales, it is now a sense of compound financing. Trying to intertwine the different sectors and bring the customer to only their line of business. B.C. and A.C now stands for before corona and after corona, it will be interesting to see what lies in the future of finance. 

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