[What Do You Think] Electronic Payment Transaction Clearing Industry Will Undermine Payment Stability

Hyokyung Lee, Professor at Chungnam National University Law School

The scale of simple payment usage is increasing significantly. Fintech (finance + technology) companies such as Naver and Kakao are enhancing user convenience by expanding partnerships with online and offline merchants through their own platforms.

Recently, the Financial Services Commission's efforts to introduce Payment Instruction Transmission Business (My Payment Business) and Comprehensive Payment Settlement Business through amendments to the Electronic Financial Transactions Act (EFTA) can be seen as efforts to keep pace with these changes. However, concerns have been raised that the introduction of Payment Instruction Transmission Business and Comprehensive Payment Settlement Business could accelerate financial challenges from big tech and fintech companies, potentially causing unfair disadvantages to existing financial institutions.

The biggest issue in the EFTA amendment bill is the Electronic Payment Transaction Clearing Business. The amendment defines Electronic Payment Transaction Clearing Business as "the business of offsetting multiple claims and debts arising from electronic payment transactions, determining the settlement amount accordingly, and instructing the settlement institution to make the payment," and regards the Korea Financial Telecommunications & Clearings Institute (KFTC) as the authorized electronic payment transaction clearing business operator. The Financial Services Commission also holds the authority to inspect and sanction electronic payment transaction clearing business operators. However, the Bank of Korea argues that the KFTC’s payment transaction clearing operations are inseparable from the Bank’s own tasks such as final settlement, liquidity support, and settlement risk management, and thus clearly infringe upon its inherent duties.

According to the Financial Services Commission’s Digital Comprehensive Innovation Plan, China’s Wanglian, which settles payment transactions between fintech companies, is cited as the basis for introducing electronic payment transaction clearing business. However, Wanglian is a system reflecting China’s unique situation where fintech companies like Alipay account for more than half of payment volumes. Moreover, the Chinese government states that Wanglian was established to ensure the safety of mobile payments and prevent illegal activities. Nonetheless, some raise concerns that the Chinese government might use data collected through Wanglian to strengthen control measures such as everyday surveillance of ordinary citizens.

If the Financial Services Commission allows the KFTC to view all transaction information of big tech companies like Naver without significant restrictions, this could amount to a "Big Brother" scenario. This means that public or private institutions would excessively collect personal information beyond what is necessary to achieve their objectives based on the law. Even if the collection and storage of internal transaction information of big tech companies aim to protect users, it can be seen as excessive regulation. User protection can be sufficiently achieved under the current EFTA’s deposit protection provisions, record retention rules, or supervisory regulations.

Therefore, the Financial Services Commission needs to find a desirable alternative that can develop Korea’s payment market in line with the changing environment without necessarily designating the KFTC as an electronic payment transaction clearing business operator. Conflicts and clashes with the Bank of Korea, which holds the fundamental responsibility for Korea’s payment system, could rather undermine the stability of the payment system. If concerns arise about instability in Korea’s payment system due to the expanded entry of fintech companies into the payment market, it would be more appropriate to discuss amendments to the Bank of Korea Act that strengthen the Bank’s supervisory duties and authority, given its higher relevance and expertise in payment operations than any other institution.

Professor Hyo-Kyung Lee, School of Law, Chungnam National University

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