South Korea has one of the most developed financial systems in the world, which has undergone remarkable development since the 1997 Asian financial crisis. Although the outbreak of the COVID-19 pandemic led to an initial economic downturn in 2020, South Korea’s financial system has proven stable and resilient during this period. After reaching a peak in April 2020, the Financial Stability Index – an indicator used by the South Korean central bank to assess the country’s financial instability – has remained consistently below the warning threshold.
What are the major financial institutions in South Korea?
The financial sector accounts for an increasingly large share of the South Korean economy. It consists of more than 3,000 institutions, such as banks, non-bank deposit-taking institutions, insurance companies, securities firms, and financial auxiliaries. More specifically, the banking sector comprises of 12 national and regional banks, three digital banks, five government-affiliated specialized banks, and 35 foreign bank branches. KB Kookmin Bank, Shinhan Bank, Hana Bank, and Woori Bank are among the largest commercial banks in South Korea.
Apart from the banking sector, South Korea is also home to a large insurance market with one of the highest insurance penetration rates in the world. In 2021, there were about 23 life insurers and 30 non-life insurers operating in the country, with Samsung accounting for the largest share in both the life and non-life insurance markets. While the COVID-19 pandemic has placed an unprecedented strain on the healthcare system, it has, in turn, had an unexpectedly positive impact on the insurance industry, particularly on saving insurance, variable life insurance, and automobile insurance.
Digital finance
The South Korean financial industry is no stranger to digitalization, but the COVID-19 pandemic has clearly brought about another significant shift towards digital finance. The number of mobile banking customers has experienced a more than six-fold increase over the past decade, and the use of mobile payment services – particularly those offered by non-bank technology companies such as Kakao and Naver – has also surged in recent years. Robo-advisors, which are digital platforms that use algorithms and Big Data to provide online wealth management services, are also growing in popularity, with the market having more than doubled in the past three years. A new emerging trend in this industry is the development of a comprehensive financial services system in which all financial institutions, such as banks, securities firms, insurance companies, and credit card companies, can offer their services on one integrated platform. Against this backdrop, digital competition among financial institutions in South Korea is becoming increasingly intense, especially with the entry of large fintech companies and ever-rising customer demand.
