[Song Seungseop's Financial Light] Will 'Ganjun Songgeum' Remain Simple in the Future?

Controversy Over 'KakaoTalk Remittance Ban' if Electronic Financial Transactions Act Amendment Passes
Fintech Remittance Services Must Obtain 'Funds Transfer Business' License
Only Anonymous Services Without Real-Name Accounts Face Difficulties
'KakaoTalk Remittance' Possible with Business Registration and Account Linking

Finance is difficult. It is entangled with confusing terms and complex backstories. Sometimes, you need to learn dozens of concepts just to understand a single word. Yet, finance is important. To understand the philosophy of fund management and consistently follow the flow of money, a foundation of financial knowledge is essential. Accordingly, Asia Economy selects one financial issue each week and explains it in very simple terms. Even if you know nothing about finance, we light the ‘fire’ of financial understanding with ‘light’ stories that you can immediately grasp.

[Asia Economy Reporter Song Seungseop] Recently, a claim that easy remittance would become difficult in the financial sector caused a stir. There were concerns that consumer inconvenience would increase and innovation would be hindered. The Financial Services Commission denied this claim. The technical principles and legal regulations surrounding easy remittance are very complex and difficult. So, how much of the controversy around easy remittance is true? Will easy remittance continue to remain a convenient technology for us?

Easy remittance is a service that allows sending money using simple authentication methods such as passwords without security cards or OTPs (one-time passwords) via mobile. For consumers, it spread rapidly in the financial sector because it allows convenient money transfers without going through complicated authentication processes like public certificates.

Easy remittance became possible by using so-called ‘firm banking’ technology. Firm banking simply refers to the bank’s automatic withdrawal service. It leverages the fact that when automatic transfers are set up for donations or utility bill payments, authentication procedures are not required. Agreements were made with banks to provide convenient remittance services using existing financial networks.

The routes for sending and receiving money also diversified. Easy remittance became possible not only for transferring money from one’s account to another person’s account but also for sending money using contact information without knowing the recipient’s account number. Companies that have handled easy remittance services include ‘Toss’, ‘KakaoPay’, and ‘Naver Financial’. The industry they belong to is called ‘prepaid electronic payment business’ under the Electronic Financial Transactions Act.

There is one important point here. Under current law, there is a separate industry called ‘electronic funds transfer business’. In principle, to provide remittance services, one must belong to this industry. The problem is that to belong to the electronic funds transfer industry, stringent regulations must be met. Therefore, many fintech companies chose the ‘prepaid electronic payment business’. Since there was a clause allowing ‘transfer and refund’ of prepaid electronic payment means, they decided to provide remittance services by utilizing this.

Even if the Electronic Financial Transactions Act changes, 'easy remittance' is possible if a bank account is linked

However, in November 2020, Yoon Kwanseok, a member of the Democratic Party of Korea, proposed the ‘Electronic Financial Transactions Act Amendment’. Article 36-2, Clause 4 of this amendment stipulates that the issuance, transfer, and refund functions of prepaid electronic payment means cannot be combined to achieve the same purpose as electronic funds transfer. This means that remittance or transfer by charging money to so-called ‘○○ money’ and sending money using contact information is prohibited.

This amendment was proposed because the scale of easy remittance transactions increased, raising risks. Financial companies have obligations to prevent voice phishing and money laundering during remittance processes, but the easy remittance process has lower safety and differences in risk management obligations. If the current situation is left as is, the practice of exchanging money without real-name verification could be neglected.

Fintech companies argue that if the bill passes, anonymous remittance under 500,000 won will become impossible. In this case, minors or those who have difficulty using bank accounts due to personal circumstances such as account seizure will find it difficult to use the service. Some even say that innovative services could be hindered. Claims that ‘KakaoTalk remittance will become impossible’ have emerged for these reasons.

However, the Financial Services Commission denies this. They state that even if the amendment is followed as is, consumer inconvenience will not increase significantly, nor will there be a major impact on big tech companies. If prepaid electronic financial businesses want to conduct remittance operations, they can continue by obtaining permission under the newly created ‘fund transfer business’ category.

Summarizing both claims, the idea that easy remittance services will be discontinued is far from the truth. ‘KakaoTalk remittance’ can still be used. However, there is a prerequisite: a bank account must be linked to the KakaoTalk account. If a real-name account is linked and the name is known, one can use KakaoTalk remittance as before by obtaining permission. However, services that send money without linking an account or without knowing the recipient’s name are prohibited.

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