Frustrating Financial Platforms... Resuming Insurance and Fund Comparison Services Is Practically Difficult

[Asia Economy Reporter Seong Giho] "There are only two weeks left until the service ends, and it's really frustrating. Although they say registration is enough, it is physically impossible to do so in time, so we will have no choice but to discontinue the service."

Financial platform companies such as KakaoPay and Naver Financial have been thrown into turmoil after financial authorities judged that selling financial products like insurance and funds through their own applications (apps) violates the Financial Consumer Protection Act. The authorities maintain that registering as intermediaries by the deadline of the 24th, when the grace period ends, is sufficient, but companies argue that it is physically impossible as they would have to completely overhaul the service interface. Some criticize the authorities for declaring the services illegal just two weeks before the end of the guidance period and express concerns that ending existing services could cause confusion among consumers.

On the 9th, the Financial Services Commission and the Financial Supervisory Service announced that they had requested corrective measures after judging some online financial platforms’ product-related services as ‘intermediation’ under the Financial Consumer Protection Act.

The Financial Consumer Protection Act, which came into effect in March, requires registration or licensing when directly selling financial products or acting as a sales agent, intermediary, or advisor. This has sparked controversy over whether fintech companies’ financial services qualify as intermediation. In particular, financial authorities have taken issue with linked investment services provided in partnership with online investment-linked finance companies. They judged that the part where pressing the ‘Invest’ button leads directly to a contract is closer to intermediation than advertising.

The fintech industry is greatly unsettled. According to the financial authorities’ standards, they must either discontinue existing services or undertake major overhauls. Additionally, to offer services that compare and recommend financial products, companies must register as financial product sales agents or intermediaries with the Financial Services Commission by the 24th.

There are also market views that even if registered as sales agents or intermediaries, resuming services will be practically impossible. In the case of fund intermediation, registration as an investment solicitation agent under the Capital Markets Act is only allowed for individuals, so fintech companies as corporations cannot register as investment product intermediaries. For insurance intermediation, registration as an insurance agency is required, but the Enforcement Decree of the Insurance Business Act prohibits registration for institutions subject to Financial Services Commission inspections, including electronic financial businesses. The financial authorities plan to allow online platforms to register as insurance agencies but are still reviewing the matter.

If the services end as they are, consumer damage is inevitable for those who have used fintech services so far. A fintech industry official lamented, "It was suddenly judged illegal just two weeks before the end of the guidance period for the business we have been conducting. If the regulations had been established earlier, we would have had time to prepare, but under the current circumstances, we have no choice but to suspend the service for the time being."

Although the financial authorities announced corrective measures, there are still criticisms that the related details remain ambiguous. Another fintech industry official pointed out, "The interpretation of intermediation is still unclear and the scope is too broad. If we remove all parts that could be ‘interpreted’ as intermediation, we would have to stop all related services, so clearer and more specific guidelines are needed."

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