Early Implementation of Small-Amount Postpaid Payments...Simple Payment Companies 'Welcome' vs Card Companies 'Urgent Concern'

Authorities Rush to Introduce Regulatory Sandbox in First Half of Year
Naver Pay and Other Simple Payment Providers Accelerate Service Launch Preparations
Card Industry Faces Urgent Pressure Due to Faster-than-Expected Adoption

Photo by Getty Images

[Asia Economy reporters Wondara and Gihayeong] The 'small-amount postpaid payment service' is causing mixed fortunes between simple payment service providers and card companies. This is because the financial authorities decided to submit and process small-amount postpaid payments through the sandbox (regulatory exemption system) at the Innovation Finance Review Committee scheduled to be held this month, even before the amendment to the Electronic Financial Transactions Act is passed. The small-amount postpaid payment service is expected to be introduced as early as the first half of the year.

According to financial authorities and related industries on the 10th, the Financial Services Commission and the Financial Supervisory Service held the 6th Digital Finance Council yesterday and decided to accelerate the provision of small-amount postpaid payment services through platforms such as Naver and KakaoPay. To this end, the authorities decided to actively allow the use of postpaid payment services smoothly through sandbox reviews and other financial regulatory measures.

The platform postpaid payment service had been unable to be implemented because the system improvement through the amendment of the Electronic Financial Transactions Act was not established. With the introduction happening earlier than initially expected, the related industries showed stark differences in their reactions.

The simple payment industry, which had delayed the service launch due to pending legislation in the National Assembly, has started a speed race in related work. A representative from a simple payment company said, "We plan to submit an application for the launch of the small-amount postpaid payment service through the sandbox," adding, "The service could start as early as the first half of the year."

Card Companies Nervous About Early Introduction of Small-Amount Payment Service

On the other hand, the card industry is under pressure. Since small-amount postpaid payments, which only card companies could provide until now, are now allowed for simple payment service providers, these providers have effectively become credit card operators as well. There are concerns that the limit of 300,000 KRW set by the authorities will also be raised in due course. A card company official said, "The postpaid payment limit for telecom companies was 300,000 KRW in 2016 but was expanded to 1,000,000 KRW last year."

Another issue is that simple payment service providers are not subject to total amount regulations on usage limits. While hybrid check cards with postpaid functions are limited to issuing only two cards per person regardless of the card company, if a user uses 300,000 KRW per provider at two or three simple payment companies, the total payment amount increases. An industry official said, "Risks related to postpaid payments could spread to other financial sectors," adding, "It would be good if small-amount postpaid payments are implemented as a complementary and subsidiary payment method according to the financial authorities' regulations, such as differentiated limits per individual and restrictions on the scale of postpaid payments per provider."

Meanwhile, the Electronic Financial Transactions Act, which formally legislates the postpaid payment service, is also expected to pass the National Assembly soon. The last discussion of the Electronic Financial Transactions Act in the Political Affairs Committee was on November 27 last year. Although the act was submitted to the committee at that time, it was not discussed due to COVID-19, the Financial Group Supervision Act, and the re-designation of the Financial Supervisory Service as a public institution. A National Assembly Political Affairs Committee official explained, "The committee is scheduled to convene on the 16th and 17th, and we will begin full deliberations on the bills that have been delayed."

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