Lowering Barriers to Fintech Finance Entry... Considering Allowing Payment and Settlement Accounts

Financial Authorities Introduce 'Small License' with Segmented Fintech Licensing Units

▲Kwon Dae-young, Standing Commissioner of the Financial Services Commission, listened to suggestions on practical competition promotion and innovation plans in the financial industry through digital innovation for fintech companies at a meeting held on the morning of the 7th at Front1 in Mapo-gu, Seoul, aimed at promoting the entry of fintech companies into the financial industry.

The financial authorities announced that they are considering the introduction of a 'Small License,' which subdivides licensing units to promote fintech companies' entry into the financial industry. They also discussed allowing fintech companies to open payment and settlement accounts to foster the emergence of digital financial unicorn companies (unlisted companies valued at over 1 trillion won).

On the 7th, the Financial Services Commission held a meeting with fintech companies at Front1 in Mapo, Seoul, chaired by Kwon Dae-young, a standing commissioner of the FSC, to discuss these matters.

The meeting was attended by representatives from 11 fintech companies, including NewGistock, December & Company Asset Management, Centbee, SmallTicket, Eximbay, WincStone Partners, Zoom Internet, Finda, Fink, Korea Credit Data, and Habit Factory.

The industry proposed the introduction of a Small License that specializes and subdivides licensing units. This measure aims to allow fintech companies to enter as new players in areas where they have specialization and strengths.

A representative example of a Small License is a small-scale specialized bank targeting small business owners or consumers with insufficient credit information (thin filers).

There were also numerous requests to allow payment instruction transmission businesses limited to payment or remittance instructions, bank agency businesses performing only some banking operations such as deposits, loans, and foreign exchange, internet-only card companies, licenses exclusively for international credit card acquiring operations, and capital requirement relaxations for small-amount short-term insurance businesses.

In the financial investment sector, there was a demand to permit robo-advisors to manage retirement pensions.

Fintech companies also requested the introduction of a comprehensive payment and settlement business system that would allow them to directly open customers' payment and settlement accounts. Currently, fintech companies, including card companies, can only perform payment and settlement operations through separate bank accounts.

Even if the comprehensive payment and settlement business is introduced, the dedicated accounts will be restricted to payment and settlement purposes only. It is expected that deposit and loan operations or interest payments, which are inherent banking tasks, will not be allowed.

Requests were also made to expand the range of financial products available on financial product comparison and recommendation platforms. In the case of insurance, automobile insurance should be included among the products eligible for comparison and recommendation, and depending on the settlement status, the scope should be expanded to funds as well.

Commissioner Kwon said at the meeting, "There is ongoing public criticism of banks for business practices that exclude rather than include, pawnshop-style operations focused on collateral and guarantees, complacency with easy interest margins on loans and deposits, and domestic-centered pie-splitting, narrow-scope business. It is necessary to establish a regulatory framework that fits the characteristics of fintech's new technologies and businesses, lower the entry barriers across the financial industry, promote real competition in the financial sector, and work together to achieve disruptive innovation and overall growth of the pie."

Starting with this meeting, the FSC will sequentially hold 'Meetings to Promote Fintech's Entry into the Financial Industry' throughout this month. On the 14th, discussions related to data fields such as MyData and artificial intelligence will take place, and on the 21st, there will be a discussion on ways to utilize big tech platform competitiveness.

The FSC plans to reflect the major proposed contents in future institutional improvement plans in connection with the 'Banking Sector Management, Business Practices, and System Improvement Task Force (TF).'

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