[Asia Exclusive] Kim Eun-kyung, Head of Financial Supervisory Service, "Big Tech's Entry into Finance May Hinder Supervisory Duties"

Interview with Kim Eun-kyung, Director of Financial Consumer Protection at the Financial Supervisory Service
"Some Big Tech Companies May Operate Financial Services Without Licenses"
"Concerns Over Big Tech Passing Fees and Other Costs to Consumers"

"There are concerns that the financial industry may become dependent on big tech companies as they participate in services such as simple payments and remittances."

Kim Eun-kyung, Director of the Financial Consumer Protection Department at the Financial Supervisory Service (Deputy Governor, pictured), made this remark in response to a question about what changes the full-scale entry of big tech companies like Naver and Kakao into the financial industry might bring.

Since leaving her 15-year academic career to jump into the most sensitive area of the financial field this March, the past six months have been a time of accelerating fundamental changes in the financial landscape. A representative example is the 'onslaught' of big tech backed by massive platforms. With the activation of 'data finance' based on amendments to the Credit Information Act and others, changes are expected to accelerate further, and financial companies, big tech, and fintech (financial technology) firms will all stand at a new starting point.

In a recent interview with Asia Economy, Director Kim pointed out that "some big tech companies may end up conducting financial business without a financial license." She is particularly wary of situations where the entry of big tech into finance leads to burdens on financial consumers. If non-financial companies perform financial services, which are heavily regulated industries, it could hinder supervisory duties, and costs such as fees provided to big tech could be passed on to consumers.

The asymmetry in information (data) transactions between financial companies and big tech, and the resulting controversies over reverse discrimination or unfair trade, are also unlikely to be easily resolved. In such a rapidly changing environment, the concern over how to protect consumer rights is growing, Director Kim explained. While stating that "it is still a stage to observe future developments," she added, "We will continuously monitor to ensure the soundness and trust of the financial industry are not compromised and devise consumer protection measures."

If these concerns relate to the future of finance, the successive private equity fund scandals such as Lime and Optimus, along with various financial disputes scattered everywhere, are immediate challenges. Director Kim’s problem recognition starts from 'structure.' She diagnosed, "The performance-oriented system of financial companies is a major cause that makes protecting financial consumers difficult. If the management goals and key performance indicators (KPIs) of financial companies are excessively focused on operating profits rather than consumer protection, the efforts of hardworking employees will inevitably lead to consumer harm."

Based on this diagnosis, Director Kim’s solution is for financial company management to improve their management systems for consumer protection. She emphasized, "Good financial products enhance consumers' quality of life, and consumers with desirable consumption behaviors make financial businesses valuable. Therefore, consumer protection and the development of the financial industry are inevitably linked."

"Financial companies' performance-oriented system must be improved"
"Consumer protection and financial industry development are linked"

Recently, there is a widely held view among financial companies that the domestic financial industry’s focus has shifted too quickly from 'industry development' to 'consumer protection.' Even within the Financial Supervisory Service’s Financial Consumer Protection Department, the structure has expanded from six departments and 26 teams to 13 departments and 40 teams. Meanwhile, various legislative attempts led mainly by the ruling Democratic Party are concretizing and surfacing various consumer protection policies.

These include amendments to the Financial Company Governance Act mandating internal control responsibilities for CEOs and imposing fines triple the amount of consumer damages, and amendments to the Financial Consumer Protection Act requiring compensation up to three times the damage amount to consumers upon detection of illegal acts. There is also a proposed amendment to the Financial Consumer Protection Act that would give the Financial Supervisory Service’s dispute mediation decisions binding force on financial companies if consumers (complainants) accept them, effectively removing financial companies’ right to appeal in court, which has sparked constitutional controversy.

From the consumer’s perspective, a strong protective shield is being established, but from the financial companies’ standpoint, it means an additional layer of already heavy regulation. Director Kim said, "It is very important to strictly deal with illegal acts by financial companies." However, she added, "We also intend to pay special attention to balancing the values of consumer protection and industry development in a harmonious way."

Earlier this year, the Financial Supervisory Service decided on heavy disciplinary actions (warning letters) against CEOs of financial companies related to the overseas interest rate-linked derivative-linked fund (DLF) incident. This has led to criticism both inside and outside the financial sector that the Financial Supervisory Service is acting as both investigator and judge, which is problematic. There is also concern that controversy may reignite as the Financial Supervisory Service recently gave preliminary notice of heavy disciplinary sanctions (suspensions) against CEOs of financial companies that sold Lime funds.

Regarding the operation of disciplinary committees, Director Kim emphasized, "Both investigation and sanctions belong to administrative authority functions, so there is no legal issue concerning separation of powers or due process principles." She also said, "If the Financial Supervisory Service were excluded from exercising sanction authority, it could hinder smooth supervisory work and lead to excessive waste of administrative resources. Considering legal and administrative efficiency perspectives, it is appropriate for the Financial Supervisory Service to perform both investigation and sanctions as it currently does." Director Kim added that domestic institutions such as the Fair Trade Commission, National Tax Service, and Board of Audit and Inspection, as well as overseas advanced financial supervisory agencies like the U.S. Office of the Comptroller of the Currency (OCC) and the UK Financial Conduct Authority (FCA), also exercise both investigative and sanctioning powers.

Interview by Lee Cho-hee, Head of Finance Department

Compiled by Kim Hyo-jin hjn2529@