"Lift Taxi Regulations and Raise Mobile Payment Limits to Foster New Industry Development"

Institutionalization of New Industries Such as Mobility and Taxi-Based Logistics Services and Relaxation of Vehicle Quota Regulations
Activation of Electronic Financial Services Including Fintech and Increase of Simple Payment Limit from 2 Million to Over 5 Million KRW per Day

[Asia Economy Reporter Changhwan Lee] #. Company A, which prepared a small parcel delivery service using taxis, applied for a regulatory sandbox demonstration exemption for the business model in the second half of 2019. This was due to the expectation that the service could be launched quickly. However, this expectation soon turned into disappointment. Although there are no clear legal regulations on taxi transportation of small cargo under 20kg, related government departments and the existing freight industry expressed opposition. The CEO of Company A sighed, saying, “It has been almost a year since we applied for the regulatory sandbox, but we have not even received a proper review. There is no certainty whether it will be approved.”

On the 22nd, the Federation of Korean Industries (FKI) released a report titled “Regulatory Laws and Policy Improvement Plans for the Development of New Industries in Korea,” commissioned to Professor Dohyun Kim of the Department of Business Administration at Kookmin University, proposing directions for policy improvements focusing on the mobility and fintech sectors.

The FKI pointed out that to revitalize the mobility industry, it is necessary to legalize new industries, limit total vehicle volume regulations, and ease contribution burdens.

In Korea, the mobility sector is rapidly expanding beyond ride services to logistics services incorporating digital technology, but there are no related laws, and conflicts with existing industry stakeholders are high. Therefore, the FKI emphasized the urgency of legalizing and mediating conflicts in this area.

For example, the current courier industry is determined at the level of Ministry of Land, Infrastructure and Transport notifications, and there is no individual law defining the industry, so even the definition of newly growing sectors such as ultra-short-term delivery and two-wheeled delivery cannot be established. Meanwhile, in new industries such as app-based logistics services using taxis, opposition from freight industry stakeholders has led to the cancellation of regulatory sandbox reviews.

Mobility regulatory issues became visible since Uber entered Korea in 2013 and were settled with the amendment of the Passenger Transport Service Act (Passenger Act) passed by the National Assembly in March. As a result, new industries providing ride services using vehicles other than taxis, such as carpooling using private cars and “Tada” using rental cars, were effectively deemed illegal.

Going forward, to provide ride services by arranging drivers with vehicles other than taxis, businesses must obtain government approval as platform transportation operators, which are subject to total volume regulations and mandatory contributions.

A platform transportation operator refers to a business that secures platforms (applications used on mobile or internet websites) and vehicles other than taxis to provide paid passenger services.

The report pointed out that at least in the enforcement decree work to be completed within this year, total volume and contribution regulations on platform transportation businesses should be minimized. Otherwise, the growth of new mobility platforms like the U.S. ‘Uber’ or Southeast Asia’s ‘Grab’ in Korea will be difficult.

Regarding fintech, the report argued for raising the simple payment limit to 5 million KRW and excluding crowdfunding from the Financial Industry Structural Improvement Act (FISIA).

To promote the development of the fintech industry, it emphasized the need to legally raise the current daily limit of 2 million KRW for simple payments and prepaid electronic payments to over 5 million KRW and to allow postpaid functions. Since simple payments directly affect user convenience and have been verified for effectiveness and safety over several years, raising the usage limit is expected to drive fintech service activation.

Additionally, electronic financial service providers such as Toss and KakaoPay should be granted the authority and responsibility to perform identity verification measures to prevent telecommunication financial fraud, temporary measures on suspicious transaction accounts, and payment suspension on suspected fraudulent accounts, similar to banks and financial companies under the Banking Act. Although voice phishing and other damages can occur on electronic financial service platforms, current telecommunication fraud damage reimbursement laws exclude electronic financial service providers.

Excluding crowdfunding (online small investment brokerage) platforms from the application of FISIA was also identified as a key task. The Capital Markets Act introduced the concept of crowdfunding to distinguish it from existing investment brokerage, but FISIA does not differentiate between the two, applying the same regulations such as investment restrictions.

Yoo Hwan-ik, Director of Corporate Policy at FKI, said, “Active policy support is needed so that companies do not miss opportunities and timing to discover new industries while avoiding regulatory risks,” and added, “For the regulatory sandbox’s achievements to lead to substantial development of new industries, institutional arrangements for post-management such as actual legal amendments and stakeholder conflict mediation are also necessary.”

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