[Herald Interview] Facing regulatory bar at home, QARASoft robo adviser heads overseas

The Korea Herald is publishing a series of interviews on promising startups in the financial technology industry. This is the 12th installment. - Ed.

Regulatory hurdles were high for local financial technology venture firm QARASoft, as its investment platform, the first of its kind in South Korea, was suspended shortly after its launch last year.

QARASoft’s now-defunct platform, called “QARA,” connected individual asset managers with funds pooled -- or borrowed -- from peer-to-peer investors, in part by making use of the venture firm’s artificial intelligence-powered robo adviser.

“The advent of new technologies have changed the concept of old legacies outside Korea, by changing the distribution mechanism,” Byun Chang-hwan, co-chief executive officer of QARASoft, told The Korea Herald when asked about the concept of QARA. “We seemed to be at the early stage of such shift.”

The “decentralized” platform collected some 100 retail investor loans in the first two weeks. But they were retrieved after the Financial Supervisory Service banned its operation, despite a patent earned the previous year for the pooling scheme of the fund and the platform’s three-year operation of its beta version.

The financial regulator questioned the nature of the hybrid platform on whether it should be seen as a P2P lending platform or an undertaker for collective investment.

“We were told that (QARA) is neither a loan service nor a fund management service,” Byun said. “The financial authorities instead encouraged us to start a business abroad.”

But the P2P scheme was not necessarily a dead loss for QARASoft, co-founded by Byun and Chief Financial Officer Oh Jong-wook in April 2014. The startup’s in-house team of AI experts have honed its robo adviser engine with deep-learning capability that does not need human intervention.

The engine for quantitative market analysis, called “Market Dreamer,” has evolved, in part through partnerships with financial firms including Hanwha Asset Management, Hanwha Life Insurance, KB Asset Management and KB Kookmin Bank, as well as through QARA platform‘s beta operation.

Using a neural network built through analyses of accumulated market data for about 30 years, the AI-powered engine will be open to retail investors through an upcoming app service called “Kosho” by the first half of this year. Kosho is designed to provide retail investors with information about financial market trends and forecasts.

“We have an edge in delivering better-refined, up-to-date market information, against other robo adviser operators,” the other co-CEO Son Bo-mi said. “The success of the business-to-business partnership with financial companies had me thinking that we could open this up to consumers.”

The service will primarily target retail investors in overseas markets in the United States, the United Kingdom and Singapore, and the English version will be launched prior to a Korean version.

Tapping into seven nations for four months in search of venture capital investment and business opportunity, Son, who was named as the co-CEO last year and was dedicated to branding the P2P scheme in June, said it was opposition from inside the company that posed a hurdle to the overseas business launch.

“Some QARASoft staffers were not desperate for investment because our business was going well in terms of revenue,” she said. “I had to persuade them that we should not procrastinate so as not to be left behind in the global race.”

QARASoft in February this year took a combined 1.1 billion won ($1 million) of pre-series A investment from venture capitals NX Venture Partner and Kingsley Ventures. Son said the firm eyes more series A investment by the end of this year.

Byun was formerly a quant manager at Samsung Asset Management, while Son formerly had experience in marketing in companies like Johnson & Johnson and Merck.

While QARASoft’s priority is now on the launch of Kosho, Byun hinted at launching QARA abroad after Kosho.

“We have spotted demand for our service on both the retail investor side and the individual fund manager side from the beginning of QARA’s closed-beta version,” he said. “Investors wanted an investment instrument with reasonable returns, while fund managers yearned for reasonable rewards. (Asset managers) should be rewarded with what they deserve.”

By Son Ji-hyoung 
(consnow@heraldcorp.com)