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Digitalization of Finance and the Future Ecosystem of the Banking Industry - Consideration from a Legal Policy Perspective -

  • Legal Theory & Practice Review
  • Abbr : LTPR
  • 2023, 11(4), pp.449-496
  • Publisher : The Korea Society for Legal Theory and Practice Inc.
  • Research Area : Social Science > Law
  • Received : October 30, 2023
  • Accepted : November 25, 2023
  • Published : November 30, 2023

Jongho Kim 1

1호서대학교

Accredited

ABSTRACT

Until now, our financial institutions have responded extremely conservatively to Information Technology (“IT”), emphasizing security and stability. It is rare for the entire picture of financial IT to be clearly known to the general public, and even though it was conservative compared to the evolution of IT in the world because it was originally a special entity, it did not pose much of a problem in itself. However, after the word FinTech became popular, the importance of innovation in the financial field was emphasized, and it was recognized that a gap exists between financial IT and general IT. As the entire society is evolving through information technology innovation, there is a shared concern that the financial industry, which has been conservative until now, needs to transition to IT in line with the trends of the times, or else it may fall behind the global trend. In the past, when there was no Internet, trying to start a business using IT required enormous costs because the business owner had to design and build everything. Therefore, large companies had to develop elaborate business plans and carry out long-term projects. A representative example is the bank online system that was dealt with in the past. However, in the ‘post-Internet era’, it has become possible for business operators to use the system base provided inexpensively on the Internet, rather than maintaining technical specifications or infrastructure themselves. As a result, it has become easier for small venture companies to start businesses with original ideas because they do not require huge costs or detailed business plans. These environmental changes created FinTech. FinTech is a testing ground for new business models in the financial sector. Of course, not all of them will succeed, but if various attempts are selected through the market, new technological innovations that have never existed before may emerge. Traditional financial institutions assemble their operations by relying on large-scale information systems built in a ‘pre-Internet era’ manner. However, considering changes in customer demands and competitive conditions, it may be difficult for traditional financial institutions to stick to traditional IT usage methods in the long term. Recently, financial institutions in Europe and the United States are actively supporting FinTech companies and making investments or acquisitions. In a broad sense, this can be considered a process in which the IT utilization style of the entire financial industry is becoming suitable for the ‘post-Internet era.’ Currently, many financial institutions offer internet banking. It is a highly functional service that has advanced security measures and allows for fund settlement with all domestic and foreign financial institutions, and generally charges lower fees compared to bank tellers. Many domestic FinTech companies use it as infrastructure to provide additional services to users of financial institutions. However, the criticism that ‘financial institutions’ response to the Internet is inadequate’ is largely due to safety. Some people argue that although the security of Internet banking is improving with the introduction of various countermeasure technologies, penetration rates are not increasing because users are too conservative. However, it can also be seen as a result of financial institutions not yet providing attractive financial services that users want to use within an acceptable risk range. Current Internet banking may need to be reexamined with a view to whether it is truly accepted by customers. Now, financial institutions are not protected within castles, but are lonely beings that must survive alone in the wilderness. There is no safe castle for banks anywhere in the world.

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