gettyimagesbank
A wide range of domestic banks and securities firms are expected to adopt dynamic pricing, powered by artificial intelligence (AI), allowing prices to be set differently for each user, according to a researcher from the Korea Capital Market Institute (KCMI), Sunday.
This prediction is leading to calls that consumer protection frameworks should be developed to ensure transparency and fairness in dynamic pricing practices.
Dynamic pricing relies on AI to analyze a user's behavior and personal information to display product prices that vary for each individual. This technique is already widely used in online shopping platforms like Coupang and Amazon.
While dynamic pricing's advantage is offering personalized prices to encourage sales, it can also cause consumer backlash by creating price fluctuations in patterns that are hard for people to understand.
In a report, KCMI researcher Jeong Su-min pointed out, "Thanks to the MyData service, now in its third year, financial institutions are able to hold personal data, creating conditions for the so-called price discrimination."
MyData in financial services, which first became available in January 2022, allows a specific company to collect and manage personal usage information from banks, cards, insurance, securities and other financial institutions with the consent of the individuals.
This service is aimed at giving customized tips based on the assets and income of each customer. Major financial firms, including KB Kookmin Bank and Mirae Asset Securities, are participating as key operators in this project.
Financial district in Yeouido, Seoul / gettyimagesbank
Although there are still few examples of dynamic pricing-based financial products in Korea, Jeong observed that the widespread adoption of dynamic pricing is only a matter of time, as user data — the key component of this technique — has continued to accumulate.
In addition, AI used in calculating personalized pricing is a technology that was already developed and tested in the 2010s, meaning that it has low costs and few entry barriers.
Jeong underscored that there are no legal restrictions on data-based price discrimination in the country, noting that it would be very difficult to hold companies accountable for personalizing financial product prices in a way that disadvantages consumers, as it is considered a business activity aimed at profit maximization.
As a solution, the researcher suggested increasing market competition rather than imposing regulations.
The suggestion is based on the belief that the structure and types of dynamic pricing are expected to evolve rapidly in the future with the latest data and the advancement of technology combined. This would make it difficult for regulations and enforcement to keep up with the pace of change.
For this reason, Jeong said that instead of relying solely on a few large MyData operators, it would be more practical to encourage multiple competing firms to launch dynamic pricing-based financial products, thereby increasing consumer choice and protecting their rights.
"The current financial MyData service requires participants to meet capital, material and personnel requirements such as major shareholder qualifications and expertise in information management," Jeong wrote in the report.
"Looking at the government's proposed improvements to the service, it is difficult to find measures that would encourage the entry of new players into the market. There needs to be more consideration on how to reasonably reduce these requirements in order to promote the growth of innovative services."