This is the first installment of a series of interviews on chiefs who run overseas units of Korean asset management, banking and securities companies, examining their key strategies for global footprint expansion. -- Ed.
KB Valbury Sekuritas, an Indonesian brokerage arm of the Korean banking giant KB Financial Group, seeks to seize opportunities in the fast-developing country by arming itself with digital innovation and integrated financial services.
KB Financial Group has set its eyes on Indonesia, a country it says has high growth potential backed by its large, young population. Six affiliates under the firm -- with businesses that include banking, credit card services and insurance -- have made their mark in Indonesia.
“Though many assume that the Southeast Asian market is similar to that of Korea's from 20 to 30 years ago, the market is significantly different from the expectations,” Oh Cheol-wu, head of KB Valbury Sekuritas, said, in an email interview with The Korea Herald.
“Indonesia has a great potential in its finance sector. The country's No. 1 bank -- Bank Central Asia’s market capitalization mounts up to 90 trillion won ($68 billion), more than quadruple of KB Financial Group's at 20 trillion won,” Oh said.
As Oh explained, Indonesia's economy has been growing fast. Bolstered by its population of 270 million people, the Southeast Asian nation's gross domestic product hit $1.19 trillion in 2021.
It has been nearly a year since KB Securities launched its brokerage business in Indonesia by acquiring a 65 percent stake of Valbury Sekuritas, an Indonesian securities underwriting and broker-dealer firm, at 50 billion won.
Acquiring a local firm was inevitable as the already inundated market had a saturation of licenses.
“Selecting and contacting the right local firm for acquisition was the most difficult part,” Oh recounted. “Bringing them to the negotiation table for a majority stake disposal over 50 percent was not easy, too.”
Following the acquisition, KB Valbury Sekuritas has been focusing on strengthening digital innovation -- a forte of the IT-developed Korean financial sector -- to make its way in the local market.
“Indonesia has great potential in the growth of digital finance," Oh said, explaining that the country has a relatively young population and that its finance market has yet to fully embrace digital transformations.
To fully incorporate digital financing, the firm has been introducing mobile-based online transactions to consumers, targeting millennials and Generation Z, or roughly those born from the 1980s into the 2010s. It is also working on improving its online trading system.
“We have moved the data center to a location near the stock exchange center to maximize the speed and stability of transactions,” Oh said.
Along with digital innovation, KB Valbury Sekuritas plans to provide an integrated financial service to Indonesian consumers, joining hands with its sister companies, similar to the KB Financial Group’s operation in Korea.
“To offer an integrated service, the affiliates need a system to jointly handle customer information, but this requires approval from financial authorities. It is our long-term goal for the time being,” Oh added.
Though it has been only a year since the launch of KB Valbury Sekuritas, Oh is well-versed in the Southeast Asian financial market, having been chief executive officer of the KB Securities Vietnam Joint Stock Co. that launched in 2017.
“Both the Indonesian and Vietnamese markets are actively attracting foreign businesses and capital based on stable economic growth and high potential for further growth. They are keen on fostering capital markets and making improvements on related regulations and infrastructure,” Oh explained.
However, he pointed out the volatility risk within the markets. Though both Indonesia and Vietnam are seeing rapid economic growth, there are limits to the emerging markets. Behind the data showing growth of the economy, population and number of securities accounts, both countries are under the shadow of a wealth gap, Oh pointed out.
“We would have to wait and see if the economic growth shown in numbers could lead to the formation of a stable middle class and further become the foundation for the overall growth of the capital market,” he said.