First Step Toward Fair Competition... 'Bank-Big Tech' Stalemate

First Day of Digital Finance Council... Consensus on Establishing Principles Formed
Quick Agreement Desired but Differences Over Mutual Information Sharing Remain Strong

Son Byung-du, Vice Chairman of the Financial Services Commission, is delivering opening remarks at the 1st Digital Finance Council held on the 10th at 'Front1' in Mapo-gu, Seoul. The meeting was conducted online in consideration of social distancing due to the novel coronavirus disease (COVID-19).

[Asia Economy Reporter Kangwook Cho] "We only confirmed the differences in positions. Future agreement is expected to be difficult."

This was the comment of a financial sector official who attended the first meeting of the newly launched 'Digital Finance Council' yesterday, established to resolve the controversy over the 'tilted playing field' between financial companies and big tech firms. At the meeting, both sides expressed hope that "this council will serve as a smooth communication channel among stakeholders and that we will mutually strive to create reasonable standards," yet they showed a tense atmosphere with no concessions regarding each other's claims.

According to the financial sector on the 11th, the first meeting of the 'Digital Finance Council' was held yesterday at Front1 in Mapo, Seoul, chaired by Son Byung-doo, Vice Chairman of the Financial Services Commission. The meeting was conducted online and attended by Vice Chairman Son, Kim Geun-ik, Senior Deputy Governor of the Financial Supervisory Service, and from the financial sector, Han Dong-hwan, Deputy CEO of Kookmin Bank, Jung Joong-ho, Head of Hana Financial Research Institute, and Cho Young-seo, Vice President of Shinhan DS. From the big tech side, Ryu Young-joon, CEO of Kakao Pay, and Choi In-hyuk, CEO of Naver Financial, participated.

Both sides showed a positive response to the establishment of a forum to set principles for fair competition. Both financial companies and big tech agree on the principle that a fair competitive environment must be created. However, clear differences in perspectives from their respective viewpoints were revealed.

A financial company official (Company A) said, "The financial sector does not want to slow down the pace of innovation or impose unnecessary regulations on fintech companies," but pointed out, "In the process of going down an 'untraveled path,' 'policy goodwill' often leads to unintended consequences."

In response, a big tech company official (Company B) stated, "If the financial sector and big tech only argue from their own positions, it will be difficult for discussions to progress," and emphasized, "In such cases, it is necessary to prioritize judgment from the perspective of consumer welfare."

The council is planned to operate as a financial sector 'hackathon'?an event where participants form teams within a limited period to continuously generate ideas and produce results?engaging in intense debates on all raised issues. The Financial Services Commission aims to prepare alternatives and announce them externally by the end of the year.

However, after the meeting, both the financial sector and big tech agreed that reaching an agreement would not be easy. A financial company official (Company C) who attended the meeting explained, "The authorities encouraged smooth information sharing between parties, hoping for a quick agreement," but added, "From the banks' perspective, if big tech does not provide detailed information, it is difficult to create customized products and services using that information, so banks inevitably insist on the principle of reciprocity in information provision."

Another financial company official (Company D) argued, "Banks must obtain approval from authorities within the legal framework, so their path to new business entry is blocked, but authorities are effectively allowing big tech to enter the financial industry," and stated, "From the banks' standpoint, having nothing more to lose, if big tech does not concede to disclose richer information, there is little room for agreement."

In response, a big tech official (Company E) said, "The financial sector talks about 'same function, same regulation,' but I want to clear up the misunderstanding that the amendment of the Electronic Financial Transactions Act could create a tilted playing field," and added, "We will work together to create reasonable standards and agreements to expand the playing field."

The financial authorities uphold the principle of 'same function, same regulation.' However, the problem is that it may be difficult to mechanically determine whether functions are the same. For example, it is not a simple matter to consider a company providing small payment functions as equivalent to existing large financial companies.

A financial authority official said, "We will carefully consider whether applying the same regulations as existing financial companies ultimately aligns with the interests of financial consumers, that is, whether it promotes healthy competition within the financial market to maximize consumer benefits," and added, "From this perspective, finding a balanced solution is important."