Postpaid Payment Service Introduced in First Half...Concerns Over Rising Delinquency Rates Due to No Total Amount Regulation (Comprehensive)

Simple Payment Providers and Card Industry Divided Over 'Postpaid Payment Service Sandbox Promotion'
Only 1,300 People with Limited Financial History Expected to Use Postpaid Payment Service in First Half
Hybrid Check Cards Had '2-Card Limit' but No Limit for Simple Payments Seen as 'Blind Spot'

[Asia Economy Reporters Wondara and Gihayeong] As the launch timing of the 'small-amount postpaid payment service' is being moved up, the fortunes of simple payment companies and card companies are diverging. Simple payment companies have been given a path to launch services that were delayed due to the Electronic Financial Transactions Act pending in the National Assembly, but card companies now face a situation where they have to share the 'pie.'

Postpaid Payment Service Likely to be Introduced in the First Half...Simple Payment Companies Apply via Sandbox

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 meeting the day before and decided to accelerate the provision of small-amount postpaid payment services through platforms such as Naver and KakaoPay. Since the passage of the Electronic Financial Transactions Act, which includes the postpaid payment service, is delayed in the National Assembly, the authorities decided to actively allow the service through regulatory sandbox reviews to enable smooth use of the postpaid payment service.

The simple payment industry has started a speed race in related work. A simple payment industry official said, "We will submit an application for launching the small-amount postpaid payment service through the sandbox," adding, "The service could start as early as the first half of the year." Naver Pay and KakaoPay, which had postponed the service launch due to the Electronic Financial Transactions Act pending in the National Assembly, plan to apply for service launch through the sandbox.

Once the service is launched, 'thin filers' such as housewives and young workers with insufficient financial history will be able to use the postpaid payment service based on credit evaluations using big data such as shopping and lifestyle information. The number of thin filers is estimated to be about 13 million.

Card Industry: "Telecom Postpaid Payment Limits Expanded from 300,000 KRW to 1,000,000 KRW in 4 Years...No Total Limit Regulation for Simple Payment"

On the other hand, the card industry is under pressure. Simple payment operators have effectively become credit card issuers. There are concerns that the limit of 300,000 KRW set by the authorities will also be raised. 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 operators have no total amount regulation on usage limits. Hybrid check cards with postpaid functions are limited to issuing only two cards per person regardless of the card company, but if a user uses 300,000 KRW per operator at two or three simple payment companies, the total payment amount increases. The delinquency rate of hybrid check cards, which served as the model for the postpaid payment service, was 3.53% as of March last year based on five companies (Samsung, Lotte, Woori, Hana Card, Nonghyup Bank), exceeding three times the personal credit card delinquency rate of 0.94% during the same period.

An industry official said, "Risks related to postpaid payments could spread to other financial sectors," adding, "It would be good if the small-amount postpaid payment is implemented as a complementary and subsidiary payment method according to the financial authorities' regulations, such as individual limit differentiation and operator postpaid scale restrictions."

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 delays caused by 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 meet 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.