Foreign investors from the U.S., U.K., and China are targeting Korean-based fintech startups with an aim of fostering the domestic growth of these companies. Hundreds of millions of dollars are expected to be invested in the industry in the next few years to serve the global market. This is an indicator that foreign investors have realized the potential growth of fintech companies in Korea.
ENTIQ, an incubator based in the U.K., is set to invest up to $132.98 million in establishing ENTIQ Korea before end of this year. This is aimed at fostering the growth of the fintech industry and supporting fintech startups in the country. The company is targeting between 40 and 50 Korean-based fintech startups over the next one year to nurture them to become global fintech service providers. Other companies that are eyeing the Korean fintech startups are Tencent and Alibaba. Luxembourg, under the leadership of the Minister of Economy, is also looking for ways on how to facilitate foreign investment in domestic fintech startups.
There are several Korean-based fintech firms that have already received capital funding from foreign investors. Altos Ventures, a venture capital company based in the U.S., has invested $1.33 million on Lendit, and $2.04 million on Viva Republica.
The high interest and investment of foreign capital in domestic fintech startups have drawn mixed reactions among stakeholders. It has the potential to help domestic fintech companies enter into the global market or it can also make them become contractors as a result of their dependence on foreign capital. This situation has previously been experienced in the Korean gaming industry which lost its talent and technology to foreign capital in China.
The Korean government can reduce overdependence of domestic fintech startups on foreign capital by creating an enabling environment for domestic companies and encouraging financial institutions to invest in these startups. This can be achieved by changing the investment conditions to favor domestic investors. For example, the U.S. and U.K. governments provide many tax benefits to companies that invest in fintech startups and the startups themselves.