"Preventing Another T-Mep Crisis"... Easier Identification of Major Shareholders in PG Companies

From Next Year, Business Reports for Electronic Financial Service Providers Must Include
Major Shareholders' Stock Holdings and More
Stronger Oversight of PG Companies Following T-Mep Incident

In the future, it will become easier to identify the status of major shareholders and executives of electronic financial service providers such as payment gateway (PG) companies and issuers of prepaid electronic payment instruments.

On the 21st, the Financial Supervisory Service announced a pre-notification of amendments to the Enforcement Rules of the Electronic Financial Supervision Regulations, stating that it will establish new rules for preparing business reports to track the stock holdings of major shareholders and the status of executives of electronic financial service providers.

With the introduction of these new rules, starting January 1 next year, the business report list for electronic financial companies will include additional items such as the stock holdings of major shareholders, the status of executives, and merchant fee information.

As e-commerce continues to grow, the number and scale of electronic financial service providers are increasing every year, but there have been repeated criticisms that related regulations are insufficient. In response, financial authorities such as the Financial Supervisory Service and the Financial Services Commission are moving to strengthen oversight. Calls for tighter regulation grew especially after last year’s large-scale settlement default incident involving Tmon and Wemakeprice (Timapeu), which resulted in significant losses for many victims.

According to the Financial Supervisory Service, as of the end of June this year, there were 233 registered electronic financial service providers, an increase of 26 compared to the end of last year. Of these, PG companies accounted for the largest share at 179, while issuers and managers of prepaid electronic payment instruments-which can be multiply registered-numbered 111, and issuers and managers of debit electronic payment instruments totaled 24. In the first half of this year, electronic financial service industry revenue reached 5.5 trillion won, up 10% compared to the same period last year. Even after the Timapeu incident last year, the electronic financial industry has continued to expand its presence.

As the industry expands, the number of companies failing to comply with government management guidance standards is also increasing. As of the first half of this year, the number of companies not meeting the Financial Supervisory Service’s management guidance standards was 38, up by 10 from the end of last year. A Financial Supervisory Service official explained, “The increase in companies failing to meet management guidance standards is due to the intensifying competition in the electronic financial sector and the deterioration of financial soundness among small, newly registered companies, which lack a stable business foundation in the early stages of operation.”

Amid growing concerns about market disorder, new regulations are being introduced. In September, the Financial Supervisory Service announced the ‘PG Company Settlement Fund External Management Guidelines,’ which require PG companies to manage more than 60% of the settlement funds they hold through external means such as trusts and payment guarantee insurance. According to the guidelines, PG companies must calculate the settlement funds to be paid to sellers on a daily business basis, and more than 60% of the settlement funds temporarily held must be managed externally through trusts or payment guarantee insurance.

The Financial Services Commission is also preparing improvements to related systems, expressing concerns over the multi-level contract structures of PG companies, illegal card cashing, and the potential for criminal misuse, which have recently become problematic.

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