South Korea launches Virtual Sandbox for fintech development
The South Korean Financial Services Commission (FSC) has announced plans to launch a digital sandbox to test new fintech products and services under development.
The move is part of a strategy to further develop the fintech market in the region. The use of a digital sandbox will enable fintech service providers to trial their new products on the market, while consumers can find new services.
South Korea has a burgeoning fintech industry. The country’s open banking system was launched in December 2019. Fintech firms can access banks' payment network and pay lower transaction fees through several open API initiatives.
Fintech was also named one of the top priorities for South Korea in 2020. The government pledged its full support for the industry and set aside a budget of US$16m to grow the sector, which is up 96.1% from 2019.
New fintech services
The isolation of the sandbox ecosystem means new programmes can be piloted and monitored independently of other services. The sandbox environment also provides support to services and products that are at an early stage in development.
The process generates information that is critical to streamlining operations and modifying products to ensure they are fully market-ready. Data has become increasingly pivotal to the way firms operate and engage with each other and the consumers they serve.
The news will be welcomed by leading entrepreneurs in South Korea. SG Lee, the CEO and Founder of Toss, South Korea’s sole fintech unicorn, valued at US$2.6bn, said recently, “There are so many gaps in the financial services ecosystem in South Korea. For example, only 9% of millennials trade online, and only 10% accessed unsecured loans online vs. over 50% in the US.”
The low adoption rates of fintech services in South Korea, is largely due to the positioning of incumbent banks. Some reports suggest as much as 40% of the population is underserved. However, South Korea is also among the world's most technologically advanced and digitally connected countries; it has the third most broadband Internet users among the OECD countries and is a global leader in electronics, digital displays, semiconductor devices, and mobile phones.
These factors make it a prime environment for propagating fintech services. The COVID-19 pandemic has also boosted the digital services industry.
The FSC has outlined the work it has planned this year to promote financial innovation and digital finance. The new digital sandbox which will enable fintechs to test their new business ideas virtually will be launched in June, although a final date is yet to be confirmed.
The FSC formally launched its flagship financial regulatory sandbox in April 2019. So far, the regulator has designated 137 ‘innovative financial service’ providers since launching.
According to reports, there are further plans to improve the management of the regulatory sandbox programme. The FSC is also keen to establish a more comprehensive support system through legislation that will focus on nurturing fintechs throughout 2021.
The work is already beginning, with Q1 seeing the start of financial support from state-backed financial institutions and private sector investments, the FSC pledged.
Part of the initiative is to promote more use of online fintech services across all industries. The regulator is also working on initiatives to encourage the use of big data analytics and enhance authentication and identity verification systems for financial services.
Furthermore, the FSC has agreed to tighten up its rules on network separation to facilitate telecommuting by staff at fintechs and financial institutions. Rules on data privacy to improve consumer rights to data and ensure they are fully informed of any data transfer risks will also be under scrutiny.
Additionally, new infrastructures will be set up throughout 2021 to provide smoother convergence of data stored at financial institutions and across different industries. Consumer safety guidelines and new testbeds dedicated to AI-based financial services will also promote the development of such services.
Amber Group Valued at US$1bn in $100m Funding Round
Amber Group, a cryptocurrency financial services firm, has raised US$100m in a Series B funding round at a pre-money valuation of $1bn.
The funding round was led by Chinese investment firm China Renaissance, and other participants in the Series B include Tiger Brokers, Tiger Global Management, Arena Holdings, Tru Arrow Partners, Sky9 Capital, DCM Ventures and Gobi Partners. Existing investors Pantera Capital, Coinbase Ventures and Blockchain.com also joined in.
Michael Wu, co-founder and CEO of Amber Group said in a statement that the funding would be used to “expand global operations to meet client demand and develop market solutions for the world’s leading crypto investors and companies.”
“We’ve had record months over the past quarter across both client flow and on-exchange market-making volumes,” Wu said in a press release. “Our cumulative trading volumes have doubled from $250 billion since the beginning of the year to over $500 billion.”
Cryptocurrencies are becoming increasingly popular, with many people investing, although not everyone seems to know what they are investing in. Using survey data collected from 750 investors earlier this year, Cardify found that only 16.9% of investors who have bought crypto “fully understand” the value and potential of cryptocurrency, while 33.5% of buyers have either zero knowledge about the space or would call their level of understanding “emerging.”
Who is Amber Group?
Amber Group is a global crypto finance service provider with a presence in Hong Kong, Taipei, Seoul, and Vancouver. Founded in 2017, Amber Group services over 500 institutional clients and has cumulatively traded over $330 billion across 100+ electronic exchanges, with over $1 billion in assets under management. The company said that its assets under management, or AUM, reached $530 million in 2020, representing a 275% increase from the previous year.
Instead of being a cryptocurrency exchange that allows users to trade individual digital coins, Amber Group CEO Michael Wu said the company is bringing a “private banking experience to the everyday customer.”
Their goal is to optimise investment flexibility, maximise investment returns and deliver long-lasting value for their clients. In 2019, Amber Group raised $28 million in Series A funding led by global crypto heavyweights Paradigm and Pantera Capital, with participation from Polychain Capital, Dragonfly Capital, Blockchain.com, Fenbushi Capital, and Coinbase Ventures.