Financial Company

A collective term for companies that provide financial services such as deposits, loans, insurance, investment, and payments while performing the functions of financial intermediation and risk managem

Financial Company

Overview

A financial company (金融社, Financial Company) is a general term for an enterprise that provides financial services such as deposits, loans, insurance, investment, and payments, and in return earns interest, fees, insurance premiums, and investment returns. It connects the suppliers of funds (savers) with the users of funds (borrowers), allocating funds across time and space, provides payment instruments, and manages and assumes credit, market, and liquidity risks. Banks, insurance companies, securities firms, asset management companies, credit card companies, and savings banks are representative examples, and they are distinguished from ordinary commercial companies in that they receive authorization from and are supervised by the financial authorities of each country.

Main Content

Definition and Scope

In the narrow sense, a financial company refers to a financial institution that has obtained authorization or permission under individual financial laws such as the Banking Act, the Capital Markets and Financial Investment Business Act, and the Insurance Business Act; in the broad sense, it also includes non-financial quasi-institutions in the registration and reporting sector, such as moneylending businesses, P2P finance, and fintech payment operators. In practice, they are often explained by dividing them into "institutional financial companies" managed by the Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service, and "non-institutional finance," which is not.

Types and Classification

Banks: Commercial banks, regional banks, special-purpose banks (Industrial Bank of Korea, Korea Development Bank, NongHyup, Suhyup), internet-only banks, and foreign bank branches. Their core business is traditional financial intermediation, taking deposits and making loans.
Non-bank deposit-taking institutions: Savings banks, credit unions, Saemaul Geumgo (community credit cooperatives), postal savings, and mutual finance. They offer higher interest rates than banks, but prudential regulation is relatively looser or the supervisory system is dualized.
Insurance companies: Divided into life insurers and non-life insurers, they collect premiums and accumulate and manage reserves in preparation for future payment events.
Financial investment companies: Securities firms (investment trading and brokerage business), asset management companies, futures companies, and investment advisory firms. They handle the issuance, distribution, and management functions in the capital markets.
Credit-specialized financial companies: Credit card companies, facility leasing (lease) companies, installment finance companies, and new technology business finance companies. They handle consumer finance and equipment investment finance.
Others: Comprehensive finance companies, mutual savings banks, moneylending businesses, P2P lending platforms, and electronic financial businesses (prepaid and payment gateway services).

Roles and Functions

First is the function of financial intermediation. Funds raised through deposits, insurance premiums, and funds are supplied in the form of loans and securities investments, supporting investment and consumption in the real sector. Second is the function of the payment system, facilitating payment for economic activities through account transfers, cards, and simple payments. Third is the function of risk management and assumption, whereby insurers pool and diversify risks, and banks screen for default risk through credit assessment. Fourth is the function of information production, improving the efficiency of fund allocation through screening and monitoring of borrowers. Fifth is the function of transmitting monetary policy, serving as the channel through which changes in the central bank's base rate propagate to the real economy via deposit and loan rates and lending conditions.

Revenue Structure

For banks, the interest rate spread (net interest margin, NIM) is the core source of revenue, to which fee income and gains or losses from securities management are added. For securities firms, revenue consists of brokerage commissions, IB (corporate finance) fees, proprietary trading gains and losses, and asset management fees. For insurers, it is divided into underwriting profit, which is premium income minus insurance claims and operating expenses, and investment profit from managing reserves. For credit card companies, merchant fees, interest on card loans and cash advances, and installment fees are the main sources of income. Recently, diversifying revenue sources (expanding non-interest income) has become a major management task depending on interest rate levels and asset market conditions.

Regulation and Supervision

Financial companies are simultaneously subject to capital and licensing requirements, prudential regulation (e.g., BIS capital adequacy ratio, K-ICS, solvency ratio, liquidity coverage ratio), business conduct regulation (duty to explain, suitability and appropriateness principles, prohibition of unfair business practices), and consumer protection regulation. In Korea, the Financial Services Commission handles policy and licensing, the Financial Supervisory Service handles inspection and supervision, and the Korea Deposit Insurance Corporation is responsible for depositor protection (up to 50 million won per person). At the global level, Basel Committee standards and FSB and IOSCO recommendations are reflected in domestic regulation.

Major Domestic Financial Holding Companies

In Korea, there are the five major financial holding companies—KB, Shinhan, Hana, Woori, and NH NongHyup—as well as regional financial holding companies such as BNK, DGB, JB, and iM (formerly reorganized from the DGB affiliates). These are comprehensive financial groups with banking, card, securities, insurance, and asset management subsidiaries, and group-level capital allocation and risk management determine their competitiveness.

Latest Trends

First is digital transformation and the spread of internet-only banks. KakaoBank, K Bank, and Toss Bank have expanded their market share through mobile-centered operations, and existing banks are responding with app reorganization and super-app strategies. Second, as financial data portability has expanded through fintech, MyData, and open banking, the boundaries between services offered by financial companies have blurred, and partnerships and competition with platform companies have intensified. Third, the adoption of generative AI has begun in earnest, being used for consultation chatbots, credit evaluation, abnormal transaction detection, and loan screening assistance, while issues of explainability, personal information, and accountability are also coming to the fore. Fourth, prudential management after prolonged high interest rates is a key topic. During the high interest rate phase of 2023–2024, delinquency rates among households and self-employed individuals rose, and real estate PF loan defaults weighed on savings banks, capital companies, and securities firms. In 2024–2025, along with expectations of base rate cuts, whether delinquency rates stabilize, the level of provisioning, and support measures for vulnerable borrowers are being addressed as policy issues. Fifth, due to changes in the capital market system, discussions on institutionalizing security tokens (STO), the launch of alternative trading systems (ATS), and improvements to dividend procedures are under way, affecting the revenue structure of securities firms. Sixth, ESG and climate risk management are being reflected in the management evaluation of financial companies, and green finance and climate stress testing are spreading. Seventh, the trend of strengthening consumer protection continues, and systems such as fines for misselling, enhancing the effectiveness of internal controls, and establishing accountability for financial accidents (responsibility structure map) are entering the settlement stage.