Naver Postpaid Payment Avoiding Financial Consumer Protection Act... Card Industry Complains "Unfairness" (Comprehensive)

April Naver Pay to Launch Small-Amount Postpaid Payment Service
Card Industry Voices "Tilted Playing Field" Complaints... Concerns Over Market Encroachment

[Asia Economy Reporter Ki Ha-young] Starting next month, Naver Pay will launch a small-amount postpaid payment service, causing the card industry to become highly alert. With the Financial Consumer Protection Act (FCPA) that came into effect on the 25th tightening the business environment, there are concerns about Naver Pay's market expansion, which is not subject to the FCPA.

According to the industry on the 29th, Naver Financial, which operates Naver Pay, plans to introduce the small-amount postpaid payment service next month. This service allows users to make payments first within a monthly limit of 300,000 KRW even if their prepaid balance is insufficient, and repay later. Previously, the Financial Services Commission designated Naver Financial's small-amount postpaid payment service as an innovative financial service last month.

Effectively, electronic financial service providers like Naver Financial can now perform roles similar to credit card companies, prompting card companies to closely monitor the situation. The influence of fintech companies is growing in the expanding simple payment market, and there is a high possibility that the postpaid payment limit of 300,000 KRW per month will increase over time.

According to the Bank of Korea's '2020 Payment Trends,' the share of simple payments among mobile device payments rose from 32.4% in the first quarter of 2019 to 41.5% at the end of last year, and the share of fintech companies within simple payments surged to 61.7% in the last quarter. The usage of simple payment services last year averaged 14.55 million transactions per day and 449.2 billion KRW, increasing by 44.4% and 41.6% respectively compared to the previous year. The small-amount postpaid payment limit for mobile carriers also started at 300,000 KRW per month in 2016 and has now increased to 1 million KRW per month.

'Hybrid Check Cards' Are Subject to the FCPA... Card Industry Calls It a "Tilted Playing Field"

In particular, card companies are raising fairness issues regarding Naver Pay not being subject to the FCPA while the card companies' business activities are inevitably restricted due to the FCPA. They argue that competition with fintech companies not subject to the FCPA could create a "tilted playing field."

In fact, 'hybrid check cards' similar to the small-amount postpaid payment service provided by Naver Financial are classified as loan products and thus subject to the FCPA. On the other hand, Naver Pay, which offers the same service, is not classified as a financial product and therefore is not subject to the FCPA. A Naver Financial official stated, "The amendment to the Electronic Financial Transactions Act (EFTA) allowing electronic financial operators to provide small-amount postpaid payments has not yet passed the National Assembly," adding, "Therefore, the small-amount postpaid payment service was selected as an innovative financial service through the financial regulatory sandbox and is not a financial product subject to the FCPA."

A card industry official expressed concern, saying, "Due to the enforcement of the FCPA, the business environment for card companies will inevitably shrink for the time being," and added, "If different regulations apply to the same service, card companies have no choice but to watch Naver Pay's market encroachment."

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