[1mm Financial Talk] Controversy Over 'KakaoTalk Remittance Ban'... Toward Maintaining 'Prepaid Business'

[Asia Economy Reporter Eunju Lee] The Financial Services Commission, which faced turmoil last August over the controversy surrounding the ban on KakaoTalk remittances, has decided to maintain the current simple remittance system. This decision appears to reflect concerns that abolishing the prepaid electronic financial business and establishing a fund transfer business, as originally proposed in the amendment to the Electronic Financial Transactions Act submitted to the National Assembly, could increase inconvenience for users of simple remittance services.

Last August, as reports spread that KakaoTalk remittances would become difficult, voices of concern and worry arose both inside and outside the fintech industry. Under the current law, businesses registered as prepaid operators could provide remittance-like services simply by transferring charged funds within their company accounts among members. Since linking bank accounts was not a 'necessity,' anonymous remittances were possible. However, after August, reports spread suggesting that the structure allowing prepaid electronic financial businesses to offer simple remittance services to users might change, deepening industry concerns. If businesses must register as fund transfer operators and link bank accounts to provide remittance services, they would face additional technical and cost burdens.

Fortunately, since last month, financial authorities appear to have put on hold efforts to implement such changes. According to insiders within and outside the financial authorities, the government has been sensitively considering consumer complaints that KakaoTalk remittances might become inconvenient. In any case, while preparing to revise the current amendment to the Electronic Financial Transactions Act, it was decided that the content should not provoke consumer inconvenience controversies. Ultimately, it was decided to proceed in a direction where fintech companies like KakaoPay do not need to newly obtain a fund transfer operator license, allowing prepaid electronic financial businesses to continue transferring and refunding charged funds to provide remittance services as under the current system.

However, voices have been raised within and outside the financial authorities calling for checks on fintech companies holding vast amounts of funds by utilizing the relatively lax prepaid electronic financial business license. After discussions, it is said that a regulatory plan was devised to strengthen additional consumer protection measures that prepaid electronic financial businesses must observe. The framework for this discussion was established about a month ago, and this content was also mentioned at the ‘5th Financial Risk Response Task Force (TF)’ meeting chaired by Kim Soyoung, Vice Chairman of the Financial Services Commission, held on the 13th. The TF also continued discussions on risks related to fintech companies such as Naver Pay and KakaoPay. In particular, they planned to prepare supplementary measures for customer deposits related to prepaid payment instruments used by these payment services.

The fintech industry has been watching the financial authorities’ discussions with anxiety. While assessing the risks that could arise from changes to the foundation on which they have operated under the current system, they have been busy studying remittance and payment services of overseas fintech companies. A fintech industry official said, “For now, we are relieved that the current system is likely to be maintained. However, since the revised proposal has not yet been disclosed, we are watching closely.”

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