[Financial Market Urgent Check] Big Tech, Need for Same Function Same Regulation... "Concerns Over Regulatory Overdrive"

Urgent Survey of 10 Economic Experts Amid Big Tech Regulation Debate
Need for Same Regulation on Same Functions but Concerns Over Hindering Financial Innovation and Consumer Benefits
Financial Platforms at a Crossroads... Some Experts Say "Regulation Pace Must Be Adjusted"

[Asia Economy Reporters Sunmi Park and Kiho Sung] Regarding the strengthening of financial regulations on big tech (large information and communication companies) and fintech such as Naver and Kakao, economic experts generally agreed that a certain level of regulation is necessary, similar to existing financial institutions. However, they expressed concerns that abrupt changes focused solely on regulation could hinder innovation and infringe on consumer convenience. While they agree with the principle of "same function, same regulation," they pointed out that excessive scope and speed of regulation could be a case of "gyogak salu (矯角殺牛)"?fixing a minor fault but causing greater harm.

Financial Platform Regulation Shock... “Direction is Right but Speed Needs Adjustment”

On the 14th, Asia Economy conducted an urgent survey of 10 economic experts including professors and researchers regarding big tech and fintech regulations. The majority agreed that reasonable regulation is necessary to protect consumers and maintain a sound market order. Many experts also shared the view of Financial Services Commission Chairman Seungbeom Ko, who has repeatedly emphasized the principle of "same function, same regulation."

Youngdo Kim, Senior Research Fellow at the Korea Institute of Finance, stated, "If the principle of same function, same regulation is not upheld, there will inevitably be loopholes to escape." He cited the example of big tech and fintech financial product comparison and recommendation services. Since these services may be considered brokerage rather than advertising, registration is required. The financial authorities have even granted a six-month grace period for the application of the Financial Consumer Protection Act, thereby securing sufficient grounds for regulation. Minhwan Lee, Professor of Global Finance at Inha University, also evaluated, "Applying the same regulatory principle to financial platforms that previously enjoyed regulatory arbitrage is fortunate in the broader context of financial industry development."

Advice was given to moderate the excessively rapid pace. Jiyong Seo, Professor of Business Administration at Sangmyung University, diagnosed, "The direction of regulation is desirable, but speed adjustment is necessary." Donggeun Cho, Professor of Economics at Myongji University, also said, "Because related companies are in a hypothermic state akin to sudden death due to regulatory strengthening, caution is needed."

However, concerns were raised that the big tech and fintech ecosystem could collapse and financial innovation could regress. Daejong Kim, Professor of Business Administration at Sejong University, pointed out, "The roles of financial platforms inevitably differ in business methods and goals from traditional financial companies, so if regulated under the same function principle, innovation cannot occur." Junggeun Oh, President of the Korea Financial ICT Convergence Society, also noted, "Platforms fundamentally provide information to consumers to enhance convenience, but this could reduce consumer convenience."

Financial Authorities Announce Additional Regulations... Financial Platforms at a Crossroads

The financial authorities are preparing to tighten the reins on big tech and fintech further, including gathering opinions on the traditional financial sector’s claims of a "tilted playing field." Recently, the Financial Services Commission requested related associations such as the Korea Federation of Banks, Credit Finance Association, Life and Non-Life Insurance Associations, and Fintech Industry Association to collect industry opinions regarding the "tilted playing field." These associations are expected to submit the collected opinions within this week.

The industry views this as a follow-up to Chairman Seungbeom Ko’s statement at his inauguration that he would resolve conflicts between big tech, fintech, and financial companies through sufficient communication. Therefore, the opinion collection is expected to comprehensively cover various views that have been considered unfair toward big tech and fintech.

The core issue is expected to be the recently controversial refinancing loan (loan switching) platforms. Financial companies argue that these platforms cause excessive competition, fee increases, and dependency on financial companies. There are also strong voices of reverse discrimination in the MyData service. While banks provide ‘transaction details’ including the names of recipients and senders and memos, the information provided by fintech companies is considered relatively less important. Another complaint is that MyData services cannot be used at offline branches.

The insurance industry plans to express concerns about the Financial Services Commission’s push for electronic financial operators to register as insurance agencies (GA). The card industry is expected to voice opinions on managing commission rates for postpaid payment and electronic financial operators such as simple payment companies.

Financial Platforms, Once Rapidly Growing, Now at a Life-or-Death Juncture

If the financial authorities accept the positions of various industries en masse, there are concerns that the expansion of financial business by big tech and fintech industries will face a red light, and their very existence could become precarious.

In fact, Kakao Pay, which is currently at risk of violating the Financial Consumer Protection Act, recently suspended sales of driver insurance (Samsung Fire & Marine Insurance), pet insurance (Samsung Fire & Marine Insurance), exercise insurance (Meritz Fire & Marine Insurance), mobile phone insurance (Meritz Fire & Marine Insurance), and overseas travel insurance (KB Insurance, NH Nonghyup Insurance, Hyundai Marine & Fire Insurance). It also temporarily ended the ‘Insurance Solver’ service, which was provided through professional consultants affiliated with Rich & Co to assist users who find insurance difficult.

As the Financial Supervisory Service requested the insurance industry to submit the status of insurance product partnerships with financial platforms, cracks have emerged in the collaboration between financial platforms and the insurance industry.

There are also concerns that big tech and fintech regulations could spread their impact across the entire financial industry. Professor Jiyong Seo predicted, "For example, credit card companies are collaborating with big tech to operate private label credit card (PLCC) businesses, and if sales on platforms are halted, they will be hit."

Voices emphasizing that consumer benefits should be prioritized are also gaining strength.

Due to the nature of the financial industry, appropriate regulations such as soundness regulations are necessary, but regulating business activities such as pricing or implementing regulations unexpectedly in unpredictable situations could cause side effects across the entire financial sector. Taeyoon Sung, Professor of Economics at Yonsei University, said, "Everything should be viewed from the consumer’s perspective," adding, "From the consumer’s perspective, loosening competition a bit and offering new services should be seen positively."

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