Open Banking Participation Within the Year... Card Industry Accelerates (Comprehensive)

Forming TF and Starting Full Discussions on Participation Within the Year
Challenges Include Network Cost Burden and Usage Fees

[Asia Economy Reporter Ki Ha-young] Card companies have begun full-scale discussions to participate in open banking within this year, a long-cherished goal. The card industry has set a policy to join as soon as possible, but there are many hurdles to overcome, such as cost-sharing for the open banking network and fairness issues with fintech companies regarding fees for using the open application programming interface (Open API), so it is expected to take a considerable amount of time.

According to the card industry on the 10th, card companies that formed a task force (TF) with the Credit Finance Association last month to participate in open banking are currently negotiating related guidelines with the Korea Financial Telecommunications and Clearings Institute, the operator of the open banking system.

Open banking is a kind of financial shared network. It is a joint payment system that allows users to check all bank accounts, transfer money, and make payments through a single application (app), and it was fully implemented in December last year. Initially, the users were limited to banks and fintech companies, but as the Financial Services Commission expanded and promoted it to the secondary financial sector, card companies are now participating. A prerequisite is the disclosure of card usage details (payment history). Card companies without accounts are gathering consensus to participate in open banking by providing customers' card usage information instead of accounts.

Card companies are eager to participate in open banking. If open banking is allowed for card companies, they can use the open banking network for card payment withdrawals and merchant payment transfers at low fees. It can also accelerate the development of future growth businesses such as MyData and MyPayment services. Facing deteriorating profitability due to reduced main revenue sources like merchant fee reductions, card companies are preparing to expand their business scope to comprehensive payment services in line with the digital era, beyond MyData and MyPayment businesses.

Hope to Participate Within the Year... Hurdles Include Network Cost Burden and Fees

However, it is also anticipated that reaching an agreement on cost-sharing for the open banking network and fees for using the Open API will take more time than expected.

Regarding the contribution fees, card companies want to bear costs at the level of securities firms and savings banks that have already confirmed participation in open banking. They also raise fairness issues with fintech companies that pay no contribution fees and only about one-tenth of the fees. A representative from Card Company A said, "Fintech companies are basically only receiving benefits," adding, "It is difficult to bear excessive contribution fees."

There are also differences in positions regarding fees for API usage currently under negotiation. Card companies argue that they should receive fees at the same level as fintech companies. A representative from Card Company B said, "It is welcome that we are participating in open banking, but the process of negotiating contribution fees along with API fees will not be easy."

Another industry official said, "We are frequently communicating with the Korea Financial Telecommunications and Clearings Institute by asking questions about any concerns regarding participation in open banking," adding, "Since secondary financial institutions such as savings banks will sequentially participate in open banking by the end of this year, discussions are underway to enable card companies to participate within this year as well."

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