S. Korean Fintechs May Be Allowed to Enter Brokerage Business

The biggest barrier to entry for fintech firms will be the capital regulations imposed on existing brokerage firms. 

South Korea’s FSC (Financial Services Commission) said earlier this week it will consider allowing fintech firms to enter the brokerage business in order to strengthen innovation in the sector, reports local media.

According to the regulator, the move does not require any lowering of entry barriers, citing low profitability in the brokerage industry.

The return on equity at South Korean brokerage firms in the last five years average about 4.8 percent, compared to 10.3 percent in the US and 9.7 percent in Japan, the FSC said.

Currently, most brokerage firms are required to have paid-in capital of at least KRW 160 billion (USD 141 million), which would present the biggest barrier to entry for fintechs.

“The view is that even if fintech and big tech companies enter the brokerage business, the impact would be negligible for large securities firms,” said Mirae Asset Daewoo Co analyst Jeong Gil-won, adding that the impact would be more significant for firms that focus on providing online services.