[Urgent Financial Market Review] G2 and EU Also Strengthen Big Tech Financial Regulations

Ant Group Loan Separation Order in China
Analyzed as De Facto Nationalization
US Introduces Antitrust Package Bill
EU Releases Draft Digital Markets Act

[Asia Economy Reporter Kiho Sung] Government regulations on big tech (large information and communication companies) and fintech firms are not limited to South Korea. Global big tech companies in countries like China and the United States have also faced strong sanctions after entering the financial industry. In particular, China, which is regarded as having the most advanced fintech finance, is even pushing for partial nationalization of related companies. As the global trend emphasizes regulation, it is expected that the wave of sanctions will continue for the time being.

According to foreign media on the 14th, it is anticipated that the loan business segment of Ant Group, the fintech subsidiary of China's Alibaba, will be effectively nationalized. This is because the Chinese government ordered Ant Group, which operates the simple payment application Alipay, to create an independent app that separates the small loan function. All credit information data from the lucrative loan business will be transferred to a state-owned company.

China's fintech regulation has been sudden. China was once called a "fintech advanced country" and experienced massive growth under government support. In 2015, it launched the first internet-only bank, WeBank, and nurtured financial giants such as Ant Group and Tencent.

In the following year, 2016, according to a survey by global consulting firm KPMG, four out of the world's top five fintech companies were Chinese companies (Ant Group, Qudian, Lufax, ZhongAn Insurance). However, the atmosphere reversed from the end of last year. The initial public offering (IPO) of fintech giant Ant Group was halted due to pressure from Chinese authorities. Alibaba, the parent company of Ant Group, was fined a large amount for antitrust violations. Now, there is even talk of "nationalization."

In the United States, fintech companies have been regulated under the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010 after the 2008 financial crisis. Similar to South Korea's Financial Consumer Protection Act, this law mainly imposes strong restrictions on excessive borrowing by banks.

This is why large big tech companies like Amazon hesitate to fully enter financial businesses such as internet-only banks. Amazon, which operates simple payment, loan, and investment services, uses its own big data for loan screening, unlike traditional banks. This is because the loan process is very strict under the Dodd-Frank Act.

Policies that strengthen regulations on big tech themselves to discourage their entry into financial businesses are also being implemented. In June, the U.S. appointed Lina Khan, a Columbia University professor known as the "Amazon killer," as chair of the Federal Trade Commission (FTC). In Congress, a bipartisan "antitrust package" bill was jointly proposed by both Democrats and Republicans. The European Union (EU) announced drafts of the Digital Markets Act (DMA) and Digital Services Act (DSA) last December. These laws prohibit platform companies from favoring their own services through algorithms or deleting pre-installed apps on smartphones. Violations may result in fines of up to 10% of revenue or forced corporate breakups.

Professor Sangbong Kim of the Department of Economics at Hansung University pointed out, "Regulations on fintech companies are also being strengthened overseas. If foreign fintech companies enter South Korea, more meticulous policies are needed because the relatively lax regulations must be applied equally to them to foster the domestic industry."

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