Financial Services Commission and Non-Bank Financial Industry Meeting... What Will They Discuss?

Afternoon of the 17th: Financial Services Commission Chairman Ko Seung-beom and Non-bank Financial Industry Meeting
Non-bank Financial Industry Likely to Request Regulatory Easing for New Business Entry

[Asia Economy Reporter Ki Ha-young] Credit card and capital companies, among other specialized credit finance companies, will meet with Financial Services Commission Chairman Ko Seung-beom to propose industry issues for business diversification. Given concerns about future business deterioration, they are expected to request regulatory relaxation related to entering new businesses to expand profits.

According to financial authorities and the industry on the 17th, Chairman Ko will hold the first meeting with the specialized credit finance industry, including credit card, capital, and new technology finance companies, in the afternoon. It is expected to be a kind of introductory meeting to discuss the development direction and major issues of the credit finance industry.

The credit finance industry is known to convey requests by sector from the perspective of business diversification to secure profitability. In the case of credit card companies, profitability is deteriorating as the main source of income, merchant fees, continues to decline. Therefore, they are expected to propose expanding ancillary businesses for entering new businesses.

Card companies already consider merchant fee income to be in deficit. They have so far compensated for this by selling loan products such as card loans and entering automobile installment financing, but the common view is that the future business environment will not be easy. Interest rates are rising due to base rate hikes, and from next year, card loans will also be subject to the Debt Service Ratio (DSR), raising concerns about business deterioration. In particular, the card fee reform plan scheduled to be announced at the end of this month seems to emphasize further reductions. However, regarding the card fee reform plan, as the announcement is imminent, there is a tendency to refrain from individual comments.

Capital companies engaged in leasing and installment businesses are expected to propose entering real estate leasing and insurance agency businesses. As card companies have entered automobile installment financing, which was the domain of capital companies, capital companies urgently need to diversify their businesses. In the new car financing market, the market share of capital companies has fallen by more than 10% over the past four years, while card companies have nearly doubled, approaching 30%. Regarding real estate leasing, only capital companies with lease assets (excluding automobiles) accounting for more than 30% of total assets can operate real estate leasing businesses according to supervisory regulations, making it practically difficult for capital companies to enter.

Entering the insurance agency business is also one of the long-standing tasks of the capital industry. The Enforcement Decree of the Specialized Credit Finance Business Act (SCFBA) permits capital companies to engage in insurance agency work, but the Insurance Business Act limits insurance agency work to "credit card companies licensed under the SCFBA," making entry impossible. The capital industry hopes to resolve this and expects synergy effects in automobile financing through automobile insurance sales.

Additionally, the industry is expected to mention the tilted playing field issue with big tech (large information technology companies) and reiterate the principle of "same functions, same regulations." An industry official said, "Since this is the first introductory meeting with the Financial Services Commission Chairman, it is expected that long-standing industry tasks will be discussed."

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