Behind the Growth of Fintech in South Korea: Digital Divide in the Use of Digital Financial Services

Abstract

Advancements in financial technology, known as "FinTech," will help both businesses and consumers of financial services. South Korea has a well-established FinTech infrastructure and resources, and has already incorporated digital financial services into daily life. However, the benefit of the proliferation of FinTech might be disproportionate in reaching diverse groups. The goal of this study is to examine how digital financial services are used in South Korea with an emphasis on disparities in the use of digital financial services. This study used the 2019 Digital Divide Survey conducted in South Korea to conduct OLS regression analysis, and create the Concentration Index (CI), which estimates the disparities that are systematically related to income level. Next, decomposition analysis on the CI was conducted to determine what factors help explain the disparity in the use of digital financial services. The analysis confirmed that there are considerable differences in the usage by income level. The multivariate results reveal that one’s device proficiency and active involvement in utilizing the internet for basic activities played significant roles in explaining the level of digital financial services usage. Poorer individuals' attitudes toward new technologies, such as a lack of interest in participating in learning and confidence in obtaining new digital skills, may prevent them from using digital financial services. This study is one of few studies to use the CI technique to examine the digital divide in digital financial services, and provide insights for educators, businesses, and policymakers.

Keywords: digital divide, FinTech, Digital Financial Services, South Korea, Concentration Index