Korea Regulator To Force Banks To Play Nice With FinTech Firms

Korea’s Financial Services Commission is gearing up to roll out new rules that would require banks in Korea to open up their payment systems to FinTech players.

According to a report in Finextra, citing the Financial Service Commission, the aim is to increase competition in the marketplace and to drive innovation in the financial services sector. As it stands, the financial payment network in the country is closed and only accessible to banks. While the banks launched an open API in August of 2016, only small FinTech firms have been given access, reported Finextra, noting that the open API system has high fees that make it challenging for FinTechs to join.

Under the plans of the Financial Service Commission banks will be required to open their payment network to all payment service provider FinTechs and other banks. That will, in turn, allow customers to access a single application to see their different bank accounts and to facilitate payments. Fees charged for using the network will be slashed to one-tenth of the level now charged to ensure competition ensues, noted the report.

“The Electronic Financial Transaction Act, adopted in 2007, has limitations in keeping up with digital transformation in the past 10 years and reflecting new developments in payment services,” the regulator said, according to the report. “The current regulatory framework, therefore, will be overhauled to embrace more flexibility and scalability in response to the emergence of diverse financial payment services.”

Additionally, the rule changes, expected to be formally proposed in the third quarter of 2019, will require banks to offer payment service providers an API that is standard for money transfers. Banks will be barred from discriminatory action against any payment service providers that use the network for transferring money. The Financial Services Commission will also down the road consider allowing qualified FinTech payment services direct access to the payment network without the involvement of banks.