The Financial Services Commission on Monday announced plans to create an open financial payment system accessible to nonbank players, and to lower the required usage costs.
The move is expected to help Korea foster more successful fintech firms here, such as the likes of mobile money transfer and simplified payment apps Toss, Naver Pay and Kakao Pay.
As of now, only banks are granted access to the financial payment network that is needed to facilitate money payments and transfers. Moreover, each bank is allowed to handle only its own banking services.
Given this, fintech companies seeking to provide payment and transfer services had to sign one-on-one partnerships with individual banks -- a cumbersome, costly and time-consuming process. Moreover, the usage fees were high -- around 400-500 won ($0.35-0.45) per case handled.
To clear away regulatory hurdles, the FSC has set out to establish an interbank financial payment network, dubbed “Open Banking,” that can be accessed by fintech players. To increase its accessibility, the network’s usage fees will be lowered to one-tenth the current level, and even lower for smaller startups.
Under this new system, people will be able to use a single mobile app to access diverse bank accounts and make cross-platform transfers or payments, the FSC said.
The Korean financial regulator plans to set up this envisioned network in phases. The efforts will begin this year with the FSC launching the Open Banking system in partnership with local banks.
It will then establish formal regulations and standards to govern and ensure the smooth operation of this system. The regulator plans to work with the Bank of Korea to amend the relevant laws so that fintech players that meet certain requirements can get direct access to this open financial payment network.
A slew of other changes aimed at deregulation -- such as permitting cash-holding account and transfer services that do not require a formal bank account and enabling limited credit payment functions to mobile payment service operators -- are also in the works, according to the FSC.
“Fintech is a chief industry that will lead Korea’s future. Given this, we believe that our open financial payment network infrastructure will serve as an important foothold for Korea’s fintech drive,” said FSC Chairman Choi Chong-ku.
“By embracing fintech and digital innovation, we must change the fundamentals of our finance sector and rejuvenate the economy.”
By Sohn Ji-young (firstname.lastname@example.org)