South Korea: Transformation from Analogue to Digital Banking

For many corporates, financial institutions and economies around the world, the financial crisis proved to be a catalyst for change, but one country has been leading its own evolution in recent years. Coinciding with an increased focus on emerging markets, for over a decade, South Korea has been driving its own innovation.

The concept of integrated treasury management may be relatively new to South Korea, however the country identified early on that the use of technology would be pivotal to its recovery from the Asian banking crisis of the 1990s. Indeed, enthusiasm for technology is embedded in its culture and is something reflected by Korean consumers and businesses alike. Now, while the rest of the world treads the long road to recovery, South Korea is leveraging innovation to create best practices used by many Korean banks and corporates as the foundation to their financial transactions. They are reaping the benefits, from driving efficiencies throughout the process, to enhancing risk management to optimising cash and treasury management.

An important trend that is providing an additional dimension to South Korea’s enthusiasm for technology is the country’s significant economic size which is creating a tipping point for the evolving requirements of global multinational treasury managers. Many of these multinational subsidiaries and joint ventures have become large companies in their own right and, with this success, have created the need for transactional banking services that resemble those of large local corporates, frequently requiring tailored, local market solutions. The challenge faced by these global corporates is to maintain the use of a global provider that enables the best possible interoperability between the international bank and the local banking providers, as well as providing bespoke solutions to empower the treasurer.

The corporate treasurers of multinational corporations in South Korea are increasingly looking to global banks to provide market knowledge and experience to better serve their complex functionality requirements, liquidity and cash management structures. Global platforms, married with local knowledge and innovative processes are providing the cornerstone for maximising global cash management strategies. Inevitably, these developments are underpinning the facilitation of transparent cash flows and enhanced risk management, while accommodating the regional nuances and differences in each country’s regulatory environment.

For example, payment and settlement arrangements have changed significantly in recent years. Payment arrangements that were previously based almost exclusively on cash- and paper-based payment instruments have moved to electronic payment arrangements. Given the increased adoption by small-value fund transfers of digital certificate technology, this has been occurring at a rapid rate and indeed, South Korea’s use of digital signatures has been regulated since 1999.

Technological Innovation

Since the introduction of South Korea’s use of digital signatures, the application of this encryption technology has expanded to nearly every online industry, helping to verify users and prevent document forgery or tampering of transactions. This has resulted in the transformation of the payments landscape, proving to be time-saving and cost-efficient as both corporates and consumers realise the true benefits of this technology.

Another initiative being driven out of South Korea is the use of an electronic tax invoice (ETI) system, which allows businesses to issue ETIs, offering tax breaks in exchange for ETI adoption. South Korea has led the way in the mandatory adoption of this electronic billing (e-billing) system at the beginning of 2010. Every ETI bill utilises a digital certificate for each transaction or grouped transaction to authenticate and validate the user or corporate on-line. As well as offering transparency around each transaction, the system electronically transmits a tax invoice to the tax authority’s information network through an accredited certification system that validates information such as suppliers’ identification and details of tax invoices.

South Korea has also been quick to recognise the benefits of electronic bank account management (eBAM). One of the biggest aggravations for corporate treasurers is the paper-shuffling required to open, close or change bank accounts. This has been exacerbated in South Korea, as all financial transactions are based on a real name (national IDs or corporate registrars with a seal present). However, through the introduction of eBAM, transaction processing has been improved which has reduced the risk of fraudulent or unauthorised transactions. By standardising the process and using technology to link it together, technology answers questions the treasurer needs to address around operational risk, costs and operational efficiencies as eBAM facilitates electronic documentation delivery. This can be carried out across a digital signature, which is automated and standardised, therefore mitigating the opportunity for fraud to occur.


The South Korean market is evolving rapidly and with it, the needs of today’s treasurer who is looking for the expertise to provide local market knowledge and global strategic cash and treasury solutions. The country has a strong heritage in technology investment and innovation and will continue to invest heavily in this area as part of a drive towards creating an efficient paperless, electronic environment.


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