[The Editors' Verdict] Financial Market Innovation Must Be Fair and Inclusive for All

Recently, a comprehensive revision of the Electronic Financial Transactions Act has been announced within the framework of digital finance. The four major innovation strategies in the revision plan aim to improve regulations from an industrial perspective by introducing new business types and rationalizing entry and operation regulations. This includes the introduction of Payment Instruction Transmission Business (MyPayment), designation of Comprehensive Payment Settlement Operators, integration and simplification of electronic financial business categories by function, and relaxation of minimum capital requirements. From the user perspective, customer fund protection and strengthening the responsibilities of financial companies will enhance protection. From the infrastructure perspective, the plan includes establishing infrastructure and institutional legislation and regulating the entry of big tech companies.

Changes are expected in the revision of the Electronic Financial Transactions Act. Although a fair start has been made in financial market innovation, the process must also be fair. The revision will newly introduce Payment Instruction Transmission Business and Comprehensive Payment Settlement Business. However, if the exclusivity principle is applied, existing financial companies, including card companies, will not be allowed to operate new businesses concurrently. Additionally, negotiations are underway for credit card companies to participate in open banking, but unlike fintech companies, they are likely to be granted the status of participating institutions rather than user institutions. This institutional change may deepen the uneven playing field by providing differential opportunities to fintech companies and financial institutions. Therefore, from the perspective of consumer protection and benefit enhancement, it is necessary to allow card companies to operate MyPayment and Comprehensive Payment Settlement Business concurrently. Linking the existing MyData business with MyPayment can increase the utilization of financial transaction information and improve and expand card companies' payment and settlement operations.

Innovation must be innovation for all. The revision introduces small-amount deferred payment business and grants small credit limits to big tech companies through small licenses. This is expected to lead to an increase in household loans and delinquencies. Currently, the credit card industry issues hybrid cards with a credit limit of up to 300,000 KRW per month to customers who do not meet the credit card issuance qualification (within grade 6). The delinquency rate for hybrid cards over one month is 4-6%, about four times higher than the average credit card delinquency rate of approximately 1.3%. Although the limit is 300,000 KRW per person, the total usage limit per person will be much higher as the number of big tech and fintech companies increases. Therefore, related regulations for maintaining soundness under the Specialized Credit Finance Business Act, which are applied to prevent credit risk, should be strictly enforced.

Big tech companies plan to introduce services recommending and selling financial products to consumers by adopting the Personal Credit Information Management Business and are pushing to enter peripheral industries of the financial sector. In this situation, big tech companies, which have strong competitiveness as customer channels, may abuse their dominant market position by artificially adjusting the exposure ranking of products in financial product recommendation services. On the other hand, financial companies may incur excessive marketing costs while trying to appease big tech companies, which is likely to be passed on to financial consumers. To promote healthy competition through separation of manufacturing and sales and to enhance consumer benefits, an institutional foundation ensuring the fairness of big tech companies as platform operators must be established, along with management and supervision. Additionally, legal definitions regarding the seller's legal status, obligations, and prohibitions are necessary.

Cases such as the suspension of operations due to accounting fraud by overseas fintech companies like Germany's Wirecard show that fintech companies aiming to operate in financial and related industries must be incorporated into the regulatory framework for accounting management and supervision, requiring monitoring and management at a level comparable to financial companies.

The problem of information monopoly or information asymmetry must also be resolved. Telemarketing and brokerage operators should be obligated to provide information to personal credit information management operators under the Credit Information Act, just like financial companies.

Professor Kim Sangbong, Department of Economics, Hansung University

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