Bank of Korea and Korea Financial Telecommunications & Clearings Institute Establish Participation Criteria for Micro-Payment System

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] Standards have been established allowing non-financial institutions such as fintech companies to participate in the small-value payment (net settlement) system just like regular banks.

On the 5th, the Bank of Korea and the Korea Financial Telecommunications and Clearings Institute announced that they have reviewed the related system in preparation for the potential expansion of the small-value payment system, which currently involves 61 institutions, and have established improved participation criteria. As of the end of May, participants in the small-value payment system are limited to the Bank of Korea, 18 domestic banks, 9 foreign bank branches, 6 microfinance institutions, 26 financial investment companies, and the post office.

Recently, with the convergence of information and communication technology and finance, the provision of payment services by non-financial institutions such as fintech companies has increased. Accordingly, the need to improve the small-value payment system has grown.

The small-value payment system mainly refers to a fund settlement system that processes small transactions such as corporate or individual account transfers, payment cards, checks, and giro payments. Since the transaction targets are broad and the number of transactions is large, a net settlement method is used, where the total transaction amount occurring during the day is offset and only the net amount is settled.

According to the newly established participation criteria, the Bank of Korea and the Korea Financial Telecommunications and Clearings Institute have clarified related regulations so that fintech companies can review participation requirements such as joining the Bank of Korea’s financial network and managing net settlement risk before deciding whether to participate. For non-bank institutions restricted from direct net settlement participation, indirect participation through an agent bank is allowed as before.

The criteria also specify that participants can directly decide whether to participate directly or indirectly based on whether they perform net settlement directly. The Bank of Korea stated that the linkage between regulations has been strengthened by reflecting mandatory matters related to small-value payment system participation, such as holding a Bank of Korea current account and signing a participation agreement for the Bank of Korea’s financial network, in the Korea Financial Telecommunications and Clearings Institute.

Meanwhile, this system improvement is scheduled to be implemented after approval at the Bank of Korea’s Monetary Policy Committee regular meeting on the 24th.

This content was produced with the assistance of AI translation services.