SentBe, cross-border finance startup, its core business synced to ESG

Recently, in Korea, efforts to improve ESG (Environment, Responsibility, and Transparent Management) in organizational operation are being actively carried out in the public and private sectors.

Hanna Yim, Head of Business Impact Group, SENTBE

It is remarkable that some Korean fintech startups associate their core business to ESG rather than putting the existing business into the framework of ESG. What they have in common is that their business aims at dealing with a financial exclusion, which is widely experienced by those who have not been considered as major customer groups. SentBe provides cross-border money transfer services for individuals and businesses in a more reasonable, convenient, and faster way than traditional banks have done. SENTBE spotted a business gap that there were no financial services exclusively designed for migrant workers, individual businesses, and micro-, small- and medium-sized enterprises.

SentBe's business venture was enabled along with the Korean government's innovative policy efforts. Only banks were allowed to provide overseas remittance services before the revision of the Foreign Exchange Transactions Act in 2017 which legalized non-bank entities' engagement in remittance business. Until the revision of the Act in 2017, people had to visit a bank, go through complicated processes, pay expensive remittance fees, and wait for days to send money overseas as there were no options available for them to choose from other than banks. Moreover, sending money abroad is generally considered a special occasion; remittance is not included in daily financial activities for most people, particularly Korean natives. As a result, people used to use banks for remittance.

Unlike Koreans, migrant workers in Korea need remittance service as a part of their essential financial activities. For them, banks' remittance services are more expensive and complicated than domestic residents experience. Besides, migrant workers are not able to track transaction status while waiting for a call from their family in their home country to know if money transfer is well completed. Some of those who suffered from these difficulties choose other options, such as asking people who go back to their home country to physically deliver their money or making remittances in illegal ways. In particular, illegal overseas remittances not only put them at risk of losing their money but also form a shadow economy where both sending and receiving countries have difficulty in aggregating and tracking the inflow and outflow of foreign currency in a proper regulatory system.

While such problems persisted, the revision of the Foreign Exchange Transactions Act in 2017 legalized a small-amount overseas remittance business and non-bank financial service providers such as SentBe became to be able to roll out remittance services to the local market. As soon as SentBe launched the services, a large number of migrant workers in Korea signed up and most of the transactions were remittances from Korea to Southeast Asian countries. Migrant workers preferred SentBe's services to banks' ones as SentBe's service was a reasonable alternative for them in a way that it is more reasonably priced, convenient, faster than, and safe as same as, traditional services. In this sense, SentBe's remittance service can be said to be a good example of a financial service that is competitive as well as that contributes to dealing with a social problem of financial exclusion, targeting migrant workers as their key customer segment whose financial needs have not been well-served by the traditional financial sector.

In 2021, SentBe is to conduct a financial literacy program for its migrant worker users in partnership with the UN Capital Development Fund (UNCDF) which mainly focuses on promoting inclusive digital economy strategy and facilitates funding for the marginalized in the world's least developed countries. The objective of the program is to enhance the capability of migrant workers to manage their hard-earned income in a strategic and well-planned manner so that their remittances can serve as sustainable and productive resources for future development in their home country.

In order for the concept of ESG to be introduced and applied to the Korean context in a meaningful way, the participation of the privileged as well as the better-off, including large corporations, those who have a great influence on society will be definitely important. At the same time, it is expected that the approach of startups to solve environmental, social, and governance issues would become the basis of competitiveness leading a sustainable future.

Published in Maeil Business Newspaper on September 16, 2021.

Source: https://www.mk.co.kr/news/business/view/2021/09/893456/