By Lee Min-hyung
|Naver headquarters in Bundang, Gyeonggi Province|
Financial stocks are losing more ground to fintech stocks amid a rapid rise of the latter's contactless financial platforms.
Naver and Kakao, the nation's dominant portal and mobile app operators respectively, are two of the largest emerging threats to top-tier financial holding firms here, such as Shinhan, KB and Woori.
It was not until recently that the emergence of such online players began to present a serious threat to traditional banks.
But with leading internet firms starting to aggressively expand their financial foothold this year, financial companies are facing a growing dilemma over how to deal with the potential threats.
|Kakao headquarters on Jeju Island|
According to the Korea Exchange, the market capitalization of Shinhan Financial Group was ranked 21st as of Sunday, down 12 places from the previous year. Shinhan and KB Financial Group are fierce rivals for the title of the nation's top financial holding firm.
For now, KB is the nation's 19th-most valuable firm by market capitalization, but the figure is also a drop of 6 places from a year earlier. Other top-tier financial holding firms, such as Hana and Woori, also reported drops in their market capitalization ranking during the same period.
The nation's top internet firms, however, have reported significant growth placing in the top-10 bracket in terms of market capitalization here for the past year.
With the coronavirus outbreak bringing about a paradigm shift in consumers' consumption patterns, the rise of the internet players has picked up more steam in recent months.
Market experts said the internet players will continue to grow and steal more limelight from traditional banks down the road, as contactless and non-facial transactions are on track to become a new standard in the post-COVID-19 world.
Naver, which started its business as the nation's first-generation internet portal operator, is running a financial business affiliate, Naver Financial. The financial subsidiary runs the nation's leading online payment platform, Naver Pay. The company also plans to expand its business into other areas ― including loan and insurance services.
Kakao is also speeding up its drive to offer a wider range of financial services after recently launching securities and fund services. The company has attracted more than 1.4 million users for its securities service since it started the platform in February.
"The internet platform business operators are accelerating their financial business," Meritz Securities analyst Kim Dong-hee said. Starting from the latter half of the year, particularly Naver is expected to make more presence in the financial market by starting its deferred payment, credit loan and insurance services, according to the analyst.
The rosy outlook for growth enabled Naver to become the nation's third-most valuable firm, with its market capitalization topping 49 trillion won. The stock price of the company has almost doubled for the past six months on the virus-induced shopping pattern changes.
Hanwha Investment & Securities analyst Kim So-hye also said Kakao shares' recent bullish run will continue in the latter half of the year on expectations for the firm's financial business growth. Kakao shares closed at 355,500 won, Friday. The economist raised his target share price to 380,000 won, as the outlook for the firm's key businesses will be on track for stable improvement.
Traditional banking players are also going all-out to catch up with the virus-sparked market paradigm shift.
KB Financial Group held an online workshop, with CEOs and senior executives of the group's key affiliates Friday to discuss responses to the crisis.
"We need to deal with the virus-induced market paradigm shift in a thorough and agile manner by using collective intelligence," the group's Chairman Yoon Jong-kyoo said during the seminar.