[Big Tech on the Test Bench] The Betrayal of Innovation's 'Meggi'... Full-Scale Regulatory Crackdown Begins

Aftermath of Card Company Merchant Fee Rate Reduction
Controversy Over Unregulated Reverse Discrimination Rekindled
Some Express Concerns Over Potential Setback in Financial Innovation

[Asia Economy Reporter Kiho Sung] As taxi calls surge during the year-end and New Year period, competition among related applications (apps) such as Kakao, Wooty, and Tada is intensifying. Among them, Tada was acquired last October by Viva Republica, the operator of the financial service app Toss. This was possible because Viva Republica is an 'electronic financial business operator' but not a 'financial institution' subject to the Financial Industry Structural Improvement Act (FISA). On the other hand, domestic banks cannot acquire apps like Tada because the acquisition of non-financial company shares is limited to within 15% under FISA.

The controversy over reverse discrimination against big tech (large information technology companies) and fintech (finance + technology), which have been making bold moves in the financial market by emphasizing innovation, is reigniting. This is due to strong backlash over unfair competition with big tech and fintech companies that are not subject to regulations, following the aftershocks of the reduction in card company merchant fees.

In the market, there have been continuous criticisms that the financial authorities, who opened the gates to promote innovation as a 'catalyst,' have ended up with a 'role reversal' due to abuse of monopolistic positions. This is the background behind the newly appointed head of the financial authorities emphasizing the need to correct the 'tilted playing field' immediately upon taking office. However, there are also concerned voices that sudden and excessive regulations could cause setbacks in financial innovation.

According to the financial sector on the 28th, the Card Company Union Council, composed of unions from seven card companies (Shinhan, KB Kookmin, Hyundai, Lotte, Hana, Woori, BC), held a press conference yesterday regarding the reduction of merchant fees and announced a postponement of the general strike. One of the preconditions for the postponement set by the union was the 'elimination of regulatory arbitrage with big tech.'

Big tech simple payment services such as Naver Pay and Kakao Pay charge higher fees than card companies but are not regulated at all. According to the office of Kim Han-jung, a member of the Democratic Party, the merchant fee card companies receive until this year is 0.8%. Naver Pay and Kakao Pay charge merchants fees of 2.2% and 2.0%, respectively.

The regulatory arbitrage is also reflected in performance. Naver Pay's payment amount in the third quarter of this year was 9.8 trillion won, a 39% increase compared to the previous year. In contrast, card companies suffered a fee loss of about 130 billion won last year.

Data sharing is also cited by financial companies as an example of reverse discrimination. It is argued that big tech can provide services tailored to their preferences to customers locked into their platforms.

A financial sector official emphasized, "Fair rules are necessary for a fair game," adding, "The principle of 'same function, same regulation' should be upheld rather than allowing certain companies to benefit through 'regulatory arbitrage.'"

On the other hand, there are concerns about big tech and fintech regulations. Critics point out that sudden regulations could infringe on consumer benefits and cause setbacks in financial innovation.

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