[Seungseop Song's Financial Light] Why Have Big Tech and Fintech Become Subjects of Regulation?

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[Asia Economy Reporter Song Seungseop] Recently, financial authorities have taken regulatory measures against big tech and fintech platforms. While existing financial companies welcomed this, expecting regulatory arbitrage to be resolved, big tech and fintech companies expressed concerns that innovation would be hindered and consumer inconvenience would increase. Why did the financial authorities decide to regulate these companies?

The issue raised by the financial authorities concerns the act of selling financial products through platforms established via mobile applications (apps). Some big tech and fintech companies, including Kakao Pay, have introduced various online-linked investment products on their apps. When users selected these products, they could conclude and manage contracts within the platform.

Platform companies have operated these activities as 'simple advertising agency' rather than 'sales.' The financial authorities viewed these operations as sales brokerage, which violates the Financial Consumer Protection Act. According to the Act, to sell financial products, one must register or obtain approval from the Financial Services Commission in accordance with laws. This is to prevent consumer harm from incomplete sales or brokerage fees. Since platform companies claimed to be advertising agencies, they did not undergo any registration or approval procedures.

One reason the authorities judged this as 'financial product brokerage' is the principle that the same regulations must be applied equally. Other financial companies also provide financial product subscription services on their platforms in the same way, and they are subject to the Financial Consumer Protection Act. Additionally, the fact that platform companies only introduced products from companies they had contracts with, received commissions from sellers, and conducted transactions within the platform?making it easy for consumers to be misled?served as grounds for this judgment.

As a result, platform companies subject to regulation must register or obtain approval from the Financial Services Commission by the 24th. Otherwise, they will no longer be able to broker financial products they have been providing.

Furthermore, the newly appointed Financial Services Commission Chairman, Ko Seung-beom, recently stated, "We will uphold the principle of same function, same regulation for big tech." Regarding the possibility of additional regulations, he said, "We will continue to monitor." The principle of same function, same regulation is a major principle of the Bank for International Settlements (BIS), meaning that if the business scope is the same, the same regulations should apply. Banks that take deposits and provide loans should be regulated the same as other banks; insurance companies the same as other insurance companies; and card companies the same as other card companies.

Existing financial companies have consistently demanded regulatory improvements by citing this principle. They complained that large platform companies newly created under the banner of innovation are engaging in the same business activities but are subject to lighter regulations.

However, among platform companies, there are voices that innovation will be hindered immediately and that comparison services, which consumers have comfortably enjoyed, will become difficult. Some experts also point out that the positive functions of platforms should be preserved and only excessive business activities should be regulated.

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