Regulatory Evasion Spreads to Financial Sector, Shadows Grow Darker

Postpaid Payment Designated as 'Innovative Finance' in Progress
Card Companies Concerned About Indiscriminate Spending Induction

[Asia Economy Reporter Kim Hyo-jin] Bank accounts, credit cards, and even insurance sales. The unstoppable penetration of Naver, the 'big tech (large information and communication company) giant,' is casting a deep shadow over existing financial companies. Unlike financial firms navigating a tough road under stringent regulations, Naver is riding the wave of innovation and effectively entering the market without resistance, intensifying the controversy over the 'tilted playing field.'

According to financial and IT industry sources on the 13th, Naver Financial, a financial subsidiary of Naver, recently sought specific advice from financial authorities regarding the designation of its 'Naver Pay Postpaid Payment (credit card)' pilot service as an 'Innovative Financial Service' and received guidance on detailed procedures. This service provides a small credit card service related to Naver Shopping payments. If designated as an Innovative Financial Service, regulations related to licensing and business activities can be waived or deferred for up to four years.

Alongside this, last month Naver registered the corporation 'NF (NF) Insurance Service Co., Ltd.' with the court. The purpose is to operate as an insurance agency. This means entering the corporate insurance agency (GA) market to sell insurance products from various companies through its own channels. The comprehensive asset management (CMA) account created by Mirae Asset Daewoo and sold by Naver Financial, known as the 'Naver Account,' is gaining attention by offering benefits such as a 3% annual interest rate and up to 3% accumulation of Naver Pay points when recharging and paying.

The problem is that these entities are largely exempted from tangible and intangible regulations applied to existing financial companies. In particular, regarding Naver's entry into the postpaid payment market, voices in the card industry are raising concerns about soundness management. They argue that providing postpaid payment functions to places without systems like Fraud Detection System (FDS) or consumer protection devices, unlike card companies, could lead to reckless consumption. A card company official pointed out, "Fintech companies were created to promote debit payments, but giving them postpaid payment functions could actually expand credit payments."

The 'Naver Account' is criticized for the potential to cause 'consumer misunderstanding.' Although it is not a typical 'bank account' that pays interest at a fixed rate and protects principal and interest up to 50 million KRW, it can be perceived as the same type of account. Financial authorities have recommended changing the product name to include 'Mirae Asset Daewoo' or similar to help consumers easily distinguish its nature.

An official from a commercial bank remarked, "If an existing bank operated in this manner, wouldn't it immediately become subject to inspection and sanctions?" Another commercial bank official said, "The financial industry operates by handling consumers' money, so it is bound by various internal controls and regulations based on laws. If the market is opened widely under the banner of innovation without consideration or adjustment, the side effects will not be trivial."

Some banks have requested financial authorities to apply the same regulations to existing financial companies and IT firms regarding the MyData business, which will be implemented next month. While banks and other existing financial companies participating in the MyData business must disclose all data, companies like Naver that enter by establishing subsidiaries only need to disclose information about their subsidiaries.

Financial authorities are also deeply concerned. They are considering incorporating big tech companies based on platform assets into the existing regulatory framework, i.e., the financial sector subject to certain regulations. Professor Lee Sung-yeop of Korea University Graduate School of Technology Management (Chairman of the Korea Data Law and Policy Association) advised, "The government should support innovation in new industries by dismantling existing regulations while providing incentives to promote innovation by easing regulations for existing industries."

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