Seoul, South Korea – When Alex Short was offered unpaid office space to locate his fintech startup in the financial district of Seoul, he jumped at the chance.
For Short, whose launch helps online shoppers demand cash back and other benefits, South Korea felt like the perfect location for its business because of its highly skilled workforce and cutting-edge technology.
“I think it makes sense to create a team there even if we work with foreign banks,” Short said from his Australian home. “It means that the two Seoul-based staff had a place to work. We plan to significantly expand that office in the coming months.”
“I believe the Korean market, especially the digital one, is ahead of the one in Australia and the US,” added Short, whose startup operates in a wood-covered workspace in the Yeouido district of Seoul run by Seoul Fintech Lab. , An accelerating program funded by the Seoul Metropolitan Government since July.
PerformID’s commitment to Seoul comes as South Korea’s capital as a major financial hub for Hong Kong and Singapore as it makes a renewed push.
As part of the push to become an “Asian Financial City,” earlier this month the city government announced plans to spend 241.8 trillion won ($ 204.4 billion) over the next five years on incentives such as employment subsidies and rental aid to attract foreign companies. Oh Se-hoon, the mayor of Seoul, is committed to making the city one of the five major financial centers in the world by 2030, with the goal of tripling foreign direct investment to $ 30 billion and attracting at least 100 foreign financial institutions.
Intentions to become a major financial hub in Seoul date back to the early 2000s, when former South Korean President Roh Moo-hyun promoted the vision of the capital as a business and financial hub for Northeast Asia.
But the city’s aspirations have taken on a new impetus lately among questions about Hong Kong’s future, as it enters the region’s main business and financial hub. The draconian law of national security and the strict “zero Covid” policy, which forces most arrivals to quarantine the hotel for 21 days.
“It was a preconceived notion of the 2008 global financial crisis,” said Kim Hansook, a think tank researcher at the Korea Capital Market Institute. “The Korean government saw it as a source of future growth because it was questioned by other developing countries in the Korean manufacturing sector.”
Seoul, however, faces many obstacles to realizing its vision. Compared to Hong Kong or Singapore, South Korea suffers from a rigid labor market, heavy regulations, relatively high taxes, and a lack of spoken English.
“Korea still has a policy of controlling foreign exchange, another major financial city or country does not control its own currency,” Kim said. “Hong Kong and Singapore’s tax levels are objectively better. Korea is on a par with big cities like New York or Sydney. ”
In the Global Financial Centers Index compiled by the Z / Yen Group, Seoul ranked 13th, three places higher than last year, but behind Hong Kong, Singapore, London, New York, Paris, Shanghai and Beijing.
Yang Jiyoung, chief financial officer of Korea’s Financial Hub, a department of South Korea’s financial regulator responsible for promoting the city, said Seoul hoped to take advantage of the uncertainty in traditional financial centers like Hong Kong.
“Other sites are in turmoil right now, take Hong Kong and China,” Yang said. “Some companies are thinking of quitting.”
Yang said the city had “bright prospects” and placed its expertise in innovation among its greatest strengths, especially the marriage between finance and traditional technology, known as fintech.
“We are at the center of our fifth plan to promote the financial sector. We’re focusing on asset management and fintech, and we’ve put a lot of effort into fintech, ”Yang said.
“Perhaps about 25 percent of the plan is focused on fintech. It’s one of the main areas we’d like to nurture. The concept of the financial center will change.”
‘The two best in the world’
Others are skeptical because Seoul has so many chances against Hong Kong.
Andrew Collier, managing director of research firm Orient Capital Research, said Hong Kong offered “the best of both worlds” with China and the British-inherited legal system.
Although a controversial national security law was enacted last year, Collier said banks and financial institutions would stay with the city as long as they continue to fulfill contracts.
“In Hong Kong you don’t need the rule of law, you just need contract law,” Collier said. “I don’t think Seoul has much of a chance to compete for part of that action.”
In short, Seoul’s future looks promising, not least because of its position at the forefront of smartphones and 5G internal technologies.
The oval-shaped glass building that includes PerformID has recently added two additional office floors for the Seoul Fintech Lab to take on more startups.
Of the 14 startups that were launched in 2018, the incubator helps companies find the right lawyers, raise money and provide office space, now helping nearly 100 companies in 10 countries. Startups cover a wide range of traditional and emerging fields, from asset management and financial investment to crowdfunding, insurtech and blockchain.
“When you see what’s happening in the world and the convergence between technology and finance, I think it makes logical sense to be positioned as a site for that in Asia,” Short said.