Transforming the Republic of Korea's Banking Industry Through MyData 2.0

As of August 2020, three main data privacy laws were amended, granting all individuals the right to request the transmission of their credit information. Consequently, all financial companies are now required to transmit credit information at the request of an individual or a MyData company acting on their behalf.^[1] Then, in January 2022, the official financial MyData service was launched in the market. MyData services could only be provided through mobile channels, so financial firms, fintechs, and BigTechs that obtained MyData business licenses embedded the service into their existing apps rather than creating a dedicated app, leading many individuals to use the service without even realizing it. Through MyData, users can view their scattered financial information—assets, liabilities, and expenditures—in one place, helping them identify unrecognized assets. MyData provides users with personalized recommendations for asset portfolios, financial instruments, loan refinancing, credit score management, card options, and more. Moreover, MyData users can provide their financial information with just one click, without needing to submit all kinds of personal documents to the financial institution.

Despite its launch, MyData services offered by Korean banks have shown low market share and profitability due to passive sales efforts. Between January 2022 and the end of 2023, MyData services accumulated 110 million subscriptions (including duplicates), and there were over 380 billion transmission requests, both one-time and regular. As of the end of 2023, a total of 69 companies, including banks (12), fintechs (24), financial investment firms (10), card companies (8), insurers (3), installment finance firms (2), credit rating agencies (2), mutual finance firms (1), public institutions (1), and telecommunications and IT firms (6), became MyData service providers. Among these operators, BigTech companies have a significantly higher share of user data requests (a metric directly linked to active customers) than banks, which remain passive in promoting their MyData services, leading to annual deficits exceeding KRW 100 billion (more than $71 million)—a figure even higher^[2] when factoring in the operational costs of maintaining their role as information providers.^[3]

Table 1: Business Performance Overview of MyData Providers as of 2022

Note:
^1. Includes concurrent and ancillary activities related to personal credit information, such as loan brokerage, data analysis, advertising, and electronic finance.
^2. Comprises Naver Financial, Kakao Pay, and Viva Republica (Toss).
^3. Operating profits related to unique business activities permitted under financial regulations are excluded for financial companies.

Source: Financial Supervisory Services. 2023. 2022 Analysis of Financial Data Industry Business Performance.

In April 2024,^[4] the Korea Financial Services Commission announced plans for MyData 2.0, focusing primarily on improving user convenience and data protection. However, the scheme also includes measures aimed at boosting bank profitability, such as permitting offline sales, extending subscription validity, enabling batch inquiries, and clarifying data-binding standards.^[5] MyData 2.0, developed by a private-public task force after gathering input from users, firms, and service providers over three months, aims to streamline subscription and unsubscription processes, add account-closing functions, and automatically delete data in cases of long-term inactivity to strengthen data protection. Offline sales, though primarily intended to support digitally vulnerable^[6] populations, also offer financial institutions a new revenue channel. Banks, for instance, can now access comprehensive asset data of walk-in users, enabling them to offer hyper-personalized asset management and potentially attract customers who use another bank as their primary institution.

The extended subscription validity period—from 1 year to 5 years—will simplify the service for users and reduce marketing costs for all MyData providers. Additionally, while users previously had to select which institutions to include, MyData 2.0 will now automatically gather information across all financial products, enhancing access to comprehensive credit information. For service providers, this change increases the value of MyData and facilitates the development of tailored services. Furthermore, clarified data-binding standards—integrating data held by providers with data collected through MyData—will enhance banks’ digital competitiveness by enabling targeted marketing, loan screening, and the development of AI-based services.

Table 2: MyData 2.0 Enhancements

Source: Financial Services Commission.

To maximize the potential of MyData 2.0, Korean banks should build synergies with existing networks and businesses to boost profitability. They must also focus on preventing incidents, such as personal information leaks, to avoid shifts in policy direction. Since customers who visit physical branches to access MyData are often new users, such as elderly individuals and foreign residents, banks should enhance their counseling capabilities, diversify financial products, and offer competitive fees to meet these customers' needs (e.g., integrated wealth management services, overseas remittances). Additionally, some customers prefer offline channels for large transactions, complex products, or high-risk investments, presenting an opportunity to attract existing online customers to branch locations. Strengthening links between mobile and offline channels is essential, enabling functions like scheduling branch consultations through mobile apps and sharing mobile transaction and consultation histories with offline channels.

Given the increased competition with BigTech and fintech companies in digital finance, banks should view MyData 2.0 as a chance to enhance digital competitiveness by collecting and integrating MyData, analyzing and utilizing this data,^[8] and expanding resources in manpower and budget. However, if personal information leaks occur at branches or if disputes arise over excessive sales of specific products,^[9] MyData services might be restricted to mobile channels. Therefore, banks should proactively establish robust internal controls, including data protection, conflict-of-interest prevention (e.g., Chinese walls, good faith), fraud prevention (e.g., real name verification, deep fake detection), employee training, access rights management, designation of responsible personnel, and damage compensation in case of accidents.

^[1] All financial companies, including banks, transmit personal credit information as data providers. Among these providers, those that have obtained a MyData license are also required to request the transmission of credit information as MyData operators.

^[2] As shown in Table 1, financial companies, including banks, recorded a total deficit of KRW 128.6 billion in 2022. However, the actual deficit is likely higher, as their role as data providers incurs various costs related to fulfilling obligations, such as IT network construction, network maintenance, and labor expenses.

^[3] Beginning in 2024, MyData operators will help alleviate this burden by covering a portion of data transmission costs. As of 2023, however, MyData operators covered only 22.1% of the total costs, with data providers, including banks, bearing the remaining 77.9% (banks are known to shoulder the largest share of these costs within the financial sector).

^[4] For more details, refer to Financial Services Commission’s press release.

^[5] The industry is currently at risk of collapse due to accumulating deficits; therefore, improving the profitability of service operators is essential for the ecosystem's sustainability.

^[6] The right to request data transmission is fundamental to MyData services, yet digitally vulnerable individuals are often unable to exercise this right. Therefore, offline channels for MyData have been permitted to help bridge the digital divide among customers.

^[8] Through Big Data analysis, it would be possible to set target customers, develop tailored services, as well as new products. Data can also be used as training material for the development of AI models such as the generative AI.

^[9] For example, in the UK in 2018, an open banking service similar to the MyData service was provided using tablet PCs at offline branches of banks (MyData service is part of the open banking service in overseas), and some bank customers just happen to leave their accounts logged in after use. In result, personal information was leaked and the service was changed to be provided online exclusive.

Korea Institute of Finance website.