[비즈한국] Fintech companies that have received investments from financial holding groups are struggling to resolve their deficits. While the holding groups provide capital and an established customer base, these resources have yet to translate into improved profitability for the fintech firms. As each company implements its own survival strategy, attention is focused on whether they can create synergies with their parent groups and overcome their losses.
DGB Subsidiary Newystock Pursues AI Integration and Paid Memberships
In August 2021, DGB Financial Group acquired a 74.03% stake in the algorithm-based stock investment firm Newystock, incorporating it as its tenth subsidiary. The goal was to strengthen competitiveness in digital asset management, marking the first instance of a financial holding company acquiring a fintech firm. DGB Financial subsequently increased its stake in Newystock to 77.3% through paid-in capital increases. Established in 2011, Newystock provides services such as "GenPort," a quant (investment strategy based on statistics and mathematics) investment platform, and "Newyrank," which offers quantitative analysis reports.
DGB Financial is seeing the benefits of the acquisition through its affiliate, IM Securities (formerly Hi Investment & Securities). For instance, GenPort users can link investment strategies created on the platform directly to their IM Securities accounts, and Newystock is sharing its expertise in direct indexing (a service where investors customize their own investment strategies) with IM Securities.
However, Newystock has seen its net losses grow since joining DGB Financial. According to DGB Financial's disclosures, Newystock's net loss went from 100 million won in 2021, the first year of the acquisition, to 1.1 billion won in 2022, and 1.8 billion won in 2023. In the first half of this year alone, it recorded a net loss of 1.1 billion won.
Newystock is implementing various strategies to improve profitability. Last July, it reorganized GenPort's core service into five membership tiers to increase the proportion of paid services. Previously, in April, the company upgraded GenPort by adding a feature that uses generative AI to design investment algorithms.
Moon Ho-jun, co-CEO of Newystock, said, "We were the first in Korea to launch a service that allows individuals to easily design investment algorithms without needing to code. With the addition of AI that plans investment strategies and manages assets based on them, system trading (automatic trading) has become even easier. As of now, Newystock is the only company in Korea providing an AI investment design service."
Newystock is preparing for a KOSDAQ listing with a target date between 2026 and 2027. On March 14 of this year, it signed a lead underwriting agreement with Shinhan Securities for the IPO. CEO Moon stated, "As the criteria for technology-specialized listings have become stricter, we are putting in effort to meet the requirements, including receiving listing consulting from the Korea Internet & Security Agency (KISA). Our top priority is improving performance, such as expanding revenue and achieving a turnaround to profit."
JB Financial Affiliate Finda Improves Deficit Through Cost Cutting
JB Financial Group acquired a stake in the non-face-to-face loan brokerage and management platform Finda in July 2023. JB Financial had been collaborating with Finda since 2020, but the cross-shareholding agreement made them official affiliates. Under the partnership, JB Financial holds a 5% stake and Jeonbuk Bank holds a 10% stake in Finda, while Finda purchased a 5% stake in JB Financial from the market. Since then, executives from JB Financial and Jeonbuk Bank have joined Finda as non-executive directors, and Finda has secured a 0.75% stake in JB Financial.
JB Financial is expanding its local bank customer base nationwide through Finda. Finda has brokered non-face-to-face apartment and housing loan products for Kwangju Bank and Jeonbuk Bank, and in April, it launched "JB Auto Collateral Loan," the first non-face-to-face auto collateral loan product from a first-tier financial institution, on its platform in partnership with Jeonbuk Bank. For Finda, this provides access to secure products from first-tier financial institutions. Both companies also use each other as testbeds for collaboration; they currently have a task force working on building alternative credit evaluation models and AI-based fraud detection systems.
However, Finda's operating profit has also fallen into the red, a result of its 2022 acquisition of the commercial district analysis firm "Openup." While revenue jumped from 29.7 billion won in 2021 to 43.4 billion won in 2022, operating profit shifted from 600 million won to a deficit of 18.9 billion won. Even in 2023, when it attracted investments from JB Financial and others, it posted an operating loss of 13.1 billion won, and in the first quarter of this year, it recorded a quarterly net loss of 3.5 billion won. A Finda official stated, "We reduced the scale of our deficit by significantly cutting costs last year (from 62.4 billion won in 2022 to 41.4 billion won in 2023)."
Hana Financial Subsidiary Finnq: "Will Streamline Underperforming Businesses and Focus on Internal Stability"
Hana Financial's subsidiary Finnq is also struggling with accumulated deficits. Finnq, a lifestyle finance platform offering financial product recommendations, asset management, and app-based rewards in one place, was originally a joint venture between Hana Financial and SK Telecom established in 2016. In July 2022, Hana Financial acquired all of SK Telecom's shares, making it a wholly-owned subsidiary. Finnq has recorded losses every year since its inception, though it managed to narrow the loss from the 10-billion-won range to 7 billion won in net loss for 2023.
The issue is that there has been little visible synergy since Finnq was incorporated into the Hana Financial family. Beyond integrating Finnq's financial social network service "Really" into Hana Bank's "Hana WonQ" app, collaborative services are hard to find. This stands in contrast to DGB Financial and JB Financial, which are actively utilizing their fintech subsidiaries for product sales and service development.
Finnq stated, "We are pursuing a business reorganization to 'choose and focus' and are managing our internal affairs with the goal of turning a profit by 2026. We have closed underperforming businesses such as gifticon sales, and in addition to 'Agree,' a lifestyle contract service launched last July, we plan to release three to five innovative new services."