Controversial Electronic Payment Act 'Concurrent Operation and Ancillary Business', Accelerating with Post-Approval

Submission under the Revised Bill Pre-Notification System
Suggestions for Relaxation Presented at the Political Affairs Committee

National Assembly Building=Yonhap News

[Asia Economy Reporter Kiho Sung] The pre-notification system for concurrent and ancillary businesses under the Electronic Financial Transactions Act amendment, which has been consistently requested by the big tech (large information and communication companies) and fintech industries, is highly likely to be relaxed to a post-approval system.

According to the financial and political sectors on the 7th, the National Assembly's Political Affairs Committee, which is reviewing the amendment to the Electronic Financial Transactions Act, recently suggested through the 'alternative discussion and review opinions' on the related bill that the pre-notification obligation for concurrent ancillary businesses be relaxed to post-reporting.

The amendment to the Electronic Financial Transactions Act, which was expected to be discussed in the National Assembly last month, has been postponed to the next session due to disagreements between the Financial Services Commission and the Bank of Korea regarding the mandatory external settlement. As the conflict between the FSC and the BOK intensified, the pre-notification system for concurrent and ancillary businesses, which was another issue, was excluded from the agenda.

Under the existing Electronic Financial Transactions Act, electronic financial service providers are prohibited from engaging in concurrent businesses other than designated ones. However, the newly proposed amendment changes the regulation to allow electronic financial service providers to engage only in foreign exchange business, deferred payment business, telecommunication billing services, identity verification agency business, period communication services, special types of value-added communication services, and other businesses prescribed by Presidential Decree.

In response, the fintech industry has continuously advocated that the concurrent and ancillary business system should be converted from a pre-notification system to a post-approval system. They argue that the pre-notification system contradicts the main direction of the amendment, which aims to activate the entry of innovative businesses into the financial industry, promote competition and innovation in digital finance, and foster related industries healthily.

They also requested that the scope of business be converted to a negative regulation system. The amendment lists allowable concurrent businesses in a positive manner, prohibiting any other businesses. Since the ancillary business scope for existing financial institutions such as banks, insurance companies, securities firms, and credit specialized companies operates under a negative system, this limits innovative ideas and discriminates against electronic financial service providers by restricting businesses that are not guaranteed profitability or are less profitable.

A fintech industry official said, "Even in global economic powers like the United States and China, which account for the majority of unicorn companies, a negative system is reflected," adding, "Contrary to the purpose of the Electronic Financial Transactions Act amendment, the concurrent and ancillary business provisions will become shackles that hinder innovative ideas and attempts."

Ryu Young-jun, Chairman of the Korea Fintech Industry Association, appealed at the public hearing on the amendment to the Electronic Financial Transactions Act, saying, "In line with the purpose of the amendment, regulations on concurrent businesses should be changed from a positive to a negative system, and ancillary businesses should be relaxed to post-notification to increase the freedom of the fintech industry and enable rapid response to technological and era changes."

As the Political Affairs Committee, which is reviewing the bill, leans toward post-reporting, it is highly likely that related content will be reflected in the next bill review. The Financial Services Commission, which had opposed the broad engagement of electronic financial service providers in concurrent and ancillary businesses on the grounds that it could break the principle of separation between industry and finance, is also reportedly considering a relaxed approach to the matter.

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