[Scale-up] DB and L Fin “Financial group + location authentication startup = trust”

In 2019, there was an unfortunate accident in which a minor without a car driver’s license fell into the sea and lost his life while driving a car with someone else’s license. This tragedy is continuously increasing. According to the ‘Current Status of Unlicensed Car Rental Accidents Among Teenagers’ released by Rep. Yoon Kwan-seok of the Democratic Party of Korea, 14 people lost their lives to unlicensed car rental accidents over the past 7 years from 2014 to 2020.

Park Young-kyung, CEO of L Fin. Source = L Fin

There is another type of unfortunate accident. It is the story of an old woman who invested the money she had saved for decades in a fund after listening to the explanation of a brokerage employee who promised to give her a high return while guaranteeing the principal. Contrary to what the brokerage staff said, the fund did not guarantee principal, and it recorded a loss of principal rather than a high rate of return. The woman complained that her brokerage staff did not explain the terms and risks of her funds properly, and when she looked closely at her signup, she said it was not hers.

Rental cars should not have been given to unlicensed teenagers. Financial products should not have been incompletely sold to grandmothers (selling financial products to subscribers without sufficient explanation of the conditions or risks of said products). Delivered in the wrong pace in the wrong way, the damage was big and irreversible. This damage could have been eliminated or reduced if it had been done in the right way and in the right place.

L Fin employees. Source = L Fin

What startup L Fin has paid attention to and has been trying to address is a technology that allows things to be done in the right place and in the right way. That is why they created a ‘location-based security and authentication solution’. DB, a financial group agonizing over a similar problem as L Fin,  reached out to L Fin. The two companies were connected through the Seoul Startup Hub (SBA). Another ideal case of CV (Corporate Venturing, an act in which large companies and startups join hands to create various synergies) has been created.

Technology that identifies and authenticates the location of a consumer with a mobile communication base station signal

L Fin is a startup founded in 2017 by CEO Park Young-kyung, who has a vast work experience as he had worked as an engineer and sales for the leading information and communication companies in Korea such as SKT and NC Soft. Shortly after it was founded, Eun-Jeong Joo, Chief Operating Officer, joined as co-CEO.

L Fin’s location-based security and authentication solution uses communication connections between smartphones and mobile communication base stations to check the user’s location, and then uses it for security or authentication by making it a password. When user authentication or certification is required when making a financial transaction, adding locations to existing security technologies such as biometric authentication and USIM authentication can strengthen security and expand the scope of use.

Description of L Fin’s mobile communication base station-based location authentication.
Source = L Fin

Station-based location authentication

Combining unique location information received from wireless infrastructures such as mobile communication base stations and Wi-Fi/beacons that cover the user’s location, and used for location password creation and authentication

The theory is simple, but the effect as a means of authentication is clear. First of all, using a high-level authentication system is easy with a smartphone, an item considered to be a daily necessity. Since the user’s location is identified with a smartphone and the information itself is used as a security factor, there is no need to carry around security cards or OTP (One Time Password, password generator), and there is no risk of leakage like ID and password. Since location data is encrypted, there is no fear of being misused for smishing (a fraudulent method using text messages) like text authentication.

By utilizing L Fin’s location authentication, it is possible to prevent unlicensed rental car accidents like the one mentioned above. Location authentication is done to check if the actual owners of the driver’s license or credit card are the ones that are in the rental car or rental car store. This technology also prevents incomplete sales of financial products. Through this location authentication, it can be confirmed whether a brokerage company employee actually met with a customer to fully explain the product being sold, and whether consent and signatures have been obtained.

L Fin’s location authentication can also be utilized in the automobile sector. It can be used for a car to detect its owner’s location. Once owner is detected, the car turns its headlights on until the owner gets closer to its location, making it easier to find. This technology could also lead autonomous vehicles to automatically move to the location of its owner.

Description of L Fin’s location authentication based on a mobile communication base station. Source = L Fin.

L Fin’s location authentication technology is also compatible with financial products. More attention is given to the value of this location authentication technology as financial companies introduce financial sales methods that visit consumers one after another. Furthermore, it prevents financial fraud. Since L Fin goes through the mobile operator’s base station when it receives location authentication, it can also use the operator’s subscription information to determine whether they are using a prepaid phone or an illegally opened phone.

DB, a company wanting to compensate for incomplete sales, meets L Fin

This is the reason why Kwon Seong-je, financial management team leader of DB FIS, DB Group’s financial information and communication service company, and Lee Kang-hoo, head of DB Inc’s financial group, paid attention to L Fin. They believe that financial companies’ problem of incomplete sales can be addressed using L Fin’s technology.

A plan to strengthen financial services by applying L Fin technology. Source = L Fin

Lee Kang-hoo, group head, said, “While looking for a technology to prevent incomplete sales, we decided to start a group-level startup collaboration program. I heard rumors about SBA while looking for a partner to connect DB and startups. Thanks to SBA’s active initiative, I was able to work with five startups, one of which was L Fin. I met L Fin at an open innovation event held by SBA, and it turned out that L Fin had already been active in other financial companies.”

Team leader Kwon Seong-jae said, “The financial sector is attempting digital transformation one after another. Achieving digital transformation requires improving both the system and the perception of salespeople. The financial sector’s business sites will no longer be a branch window – it will be the actual place or location of consumers. At this time, we decided that L Fin’s location-based authentication solution would be useful.”

As explained by Lee Kang-hoo, group head, L Fin previously worked with several financial companies to verify or test their location authentication technology. Although they have encountered failures in the process, this has led for them further improve on the technology.

L Fin initially tried to determine the location with GPS. However, due to the nature of GPS receiving satellite signals, there are cases in which the location is incorrectly recognized in shaded areas, such as underground or in buildings, where signals are not easily reached. It is also possible to forge or falsify the position. So, Elfin has improved its technology to receive location authentication with a signal from a mobile communication base station that cannot be forged or tampered with and produces almost no signal shading.

A plan to strengthen corporate security by applying L Fin technology. Source = L Fin

A problem also arises when receiving location authentication with a signal from a mobile communication base station. The X-axis position is fine, but the Y-axis position, i.e. height, is sometimes inaccurate. It is difficult to know whether the user is on the 1st floor or the 10th floor if the location is determined only on the X-axis. To address this, L Fin introduced a technology to more accurately determine location information using Wi-Fi, Bluetooth, and beacons (devices that emit signals).

As we were talking, a strange thought suddenly occurred to me. L Fin’s location authentication technology uses a signal from a mobile communication base station. In other words, as long as my smartphone is on, someone can know my location 24 hours a day.

CEO Eun-Jeong Joo said, “L Fin never tracks the location information of consumers 24 hours a day. It only works temporarily at a certain moments, for example when a consumer listens to and signs a financial product or when an employee of a financial company approves a specific function.” “Of course, when we get location information, we send a signal or message to the consumer or financial company employee to let them know,” he stressed.From strengthening services of financial companies to time and attendance management.

Together, DB and L Fin, changed the way financial ODS (Out Door Sales) was done. The business aspect of traditional finance was to face consumers in physical spaces such as branches and office spaces. The duty of explanation, a principle when selling financial products, was also well followed.

In financial ODS, sales staff go directly to consumers with tablet PCs and the like. A so-called “moving branch” is a concept that provides friendly financial services. However, even if the concept of a branch is changed, the duty of explanation must be thoroughly and strictly observed.

In September this year, the Financial Consumer Protection Act was passed. The Act includes measures to strengthen the duty of explanation. Thanks to this, consumers can listen in detail to terms and conditions when purchasing financial products, including insurance. The registration certificate of the insurance solicitor can even be checked upon request. The security and trust of face-to-face services has established itself as a competitive edge in the financial industry. DB and L Fin, who agreed with this point, merged finance and location authentication services, and advanced them together.

L Fin attendance management tool I’m here. Source = L Fin

Following the location authentication technology, DB is considering introducing L Fin’s attendance management tool ‘I’m Here’. L Fin’s ‘I’m Here’ is a location authentication app created for job training at private institutes and companies. This tool can be applied to the sales support of financial enterprises and corporate business. The information of consumers met by sales staff can be digitally converted and automatically managed, and it can also be used to authenticate employees to work from home.

The two companies are also considering ways to automatically determine the location of consumers with location authentication technology when insurance services are dispatched, and to prevent financial accidents by abusing prepaid mobile phones in advance.

DB and L Fin achieved great results in just two months after forming the CV. DB helps L Fin’s technology development and market development. Not only did it ease the burden of SI, but it also paved the way for collaborations with various affiliates at the group level. L Fin repays by realizing ideas and technologies that will help DB adapt to the new financial age.

Choi Soo-jin, SBA part head, “Not only large companies, but also CVs between group companies and startups can create synergy”

CEO Eun-Jeong Joo emphasized that, thanks to the CV partner and DB, he was able to overcome the growing pains of startups. No matter how innovative a start-up is, it cannot operate properly if it does not know the circumstances of the industry well. This is especially true in the still closed and conservative financial industry.

L Fin location authentication technology introduction screen. Source = L Fin

She said, “We have introduced L Fin’s technology to several financial companies before. However, we didn’t get any feedback, so we didn’t know how useful our technology was or where we needed to fix it. This is what startups should be most wary of. The industry that you see and judge is only a part, and never the whole. Always keep in mind that we can be wrong, we need to broaden our horizons and look around the industry to get feedback,” she stresses.

She continued, “Feedback is sometimes stingy and painful. This comment should be accepted. This is especially true in an industry with narrow knowledge, such as the financial sector. The DB directly introduced the working managers of the financial affiliates and gave feedback, giving them the vivid voices of the business. Based on the valuable experience of how the processes of large financial companies operate, we were able to manage L Fin’s technology.”

Lee Kang-hoo, group head, said, “I am grateful to have met a good startup like L Fin as DB’s first CV partner. I want to continue SBA and CV steadily. We also expect that L Fin will give new vitality to DB group’s culture.”

Second from left: SBA part manager Choi Soo-jin, DB Inc financial group head Kang-hoo Lee, and DB FIS financial operation team leader Kwon Seong-jae

SBA part head Choi Soo-jin said that DB made a good CV case thanks to their active participation in open innovation with startups..

“I had no experience working with financial companies including insurance companies,” she said. However, DB showed a strong will to utilize the entire group of affiliates, including finance and insurance, for CV. “I felt a sense of challenge with the idea that I could do more for the startup and paint the big picture for the CV,” she said.

She continued, “Thanks to DB, I was confident that I could run CV with a group company. Financial startups mainly applied for the first CV with DB, but in 2022, a more diverse set of startups will participate to receive opportunities and support.” She recommended large companies and group companies considering CV to participate.