[Song Seungseop's Financial Light] What Is the 'Jeongeumbeop' That Everyone Is Fighting About?

Financial Services Commission and Bank of Korea, What Is the Core of the Electronic Financial Transactions Act Conflict?
Who Oversees Big Tech and Fintech Internal Transaction Settlement?
"Consumer Protection" vs "Privacy Protection" Tense Differences

Finance is difficult. It is entangled with confusing terms and complex backstories. Sometimes, you need to learn dozens of concepts just to understand a single word. Yet, finance is important. To understand the philosophy of fund management and consistently follow the flow of money, a foundation of financial knowledge is essential. Accordingly, Asia Economy selects one financial term each week and explains it in very simple language. Even those who know nothing about finance can immediately understand these 'light' stories that illuminate the 'light' of finance.

Yoon Kwan-seok, Chairman of the National Assembly's Political Affairs Committee, is presenting the agenda for the public hearing on the amendment to the Electronic Financial Transactions Act held at the National Assembly's Political Affairs Committee on the 25th.
[Photo by Yoon Dong-joo]

[Asia Economy Reporter Song Seung-seop] Policies often trigger conflicts among various stakeholders. Sometimes, government agencies even argue over policies. A similar situation is currently unfolding in the financial sector. It is all about the Electronic Financial Transactions Act (EFTA). Why has the EFTA become a hot topic in the financial industry?

The debate began when Yoon Kwan-seok, a member of the Democratic Party and chair of the National Assembly’s Political Affairs Committee, introduced a bill to amend the EFTA in November last year. The EFTA is a law related to financial transactions conducted through ATMs, payment terminals, computers, and so on. Simply put, it contains the rules to be followed when buying clothes online and making payments.

Who Supervises the Clearing of Internal Transactions for Big Tech and Fintech?

Yoon Kwan-seok’s amendment includes provisions to allow big tech companies like Naver and KakaoPay to easily enter the financial industry, promote competition, and establish management and supervision measures. However, the Financial Services Commission (FSC) and the Bank of Korea (BOK) have expressed differing opinions regarding the 'clearing' operations.

Clearing refers to the process of calculating the creditor-debtor relationships arising from financial transactions to determine the exact amounts financial companies must exchange. For example, suppose Mr. Kim transfers 100 million KRW from Bank A to Bank B, and Mr. Lee transfers 50 million KRW from Bank B to Bank A. Although the two banks must exchange 100 million KRW and 50 million KRW respectively, after clearing, Bank A only needs to pay 50 million KRW. This is much more convenient.

The Korea Financial Telecommunications & Clearings Institute (KFTC) performs the necessary calculations for clearing. The KFTC determines that "Bank A must transfer 50 million KRW." The management, supervision, and actual money transfer roles are handled by the central bank, the BOK. Each bank opens an account with the BOK, and the BOK deducts 50 million KRW from Bank A’s account and transfers it to Bank B’s account.

The problem is that the EFTA amendment requires fintech and big tech companies’ 'internal transactions' to also go through clearing by an external institution (KFTC), with the FSC granting approval and supervision. Until now, internal transactions such as transferring money within KakaoPay accounts did not go through the clearing process. If the amendment passes, fintech and big tech companies will also have their transactions cleared by the KFTC and supervised by the FSC.

FSC: "Consumer Protection" vs BOK: "Privacy Invasion"

The FSC argues that internal transactions must also undergo clearing and be supervised to protect financial consumers. Financial accidents can occur even during big tech internal transactions, and in such cases, submitting data and audits can help uncover the truth.

The BOK opposed this, stating that the FSC’s involvement interferes with the unique duties of an independent central bank. Moreover, since the FSC is a government agency that can view transaction details, it constitutes a privacy invasion and could become a 'Big Brother,' they strongly criticized.

The FSC strongly rebutted. They said they are not auditing all BOK operations, and that data submission and supervision occur only under legal procedures in the event of financial accidents. Recently, FSC Chairman Eun Sung-soo told reporters, "Does having communication records make a telecom company a Big Brother?" and "Even now, when funds are transferred, information goes to the KFTC, so the BOK is essentially calling itself Big Brother."

Adding to the tension, BOK Governor Lee Ju-yeol appeared before the National Assembly’s Planning and Finance Committee and countered, saying, "The EFTA amendment is indeed a Big Brother law," deepening the conflict.

Professor Jeong Sunseop of Seoul National University School of Law is speaking at a public hearing on the amendment to the Electronic Financial Transactions Act during the plenary session of the National Assembly's Political Affairs Committee on the 25th. From left, Professor Jeong Sunseop of Seoul National University School of Law, Professor Yang Gijin of Jeonbuk National University School of Law, Professor Ahn Donghyun of Seoul National University Department of Economics, Jung Jungho, Director of Hana Financial Management Research Institute, and Ryu Youngjun, President of the Fintech Industry Association.
[Photo by Yoon Dongju]

Stakeholders related to the EFTA also voiced their opinions. The Personal Information Protection Commission, a government agency under the Prime Minister’s Office, argued that the amendment does not align with the ideals and principles of personal information protection. Their concern was that the EFTA does not specify exactly what information will be provided to the FSC and delegates this to presidential decrees. The National Financial Industry Labor Union criticized both institutions, saying that while many issues need to be discussed as KakaoBank and TossBank enter finance, the dispute over who will manage the Korea Financial Telecommunications & Clearings Institute’s work is just a turf war.

As the controversy grows, the BOK and FSC are showing signs of restraint. The FSC plans to consult with the Personal Information Protection Commission. However, given the clear differences between the two agencies, significant difficulties are expected before the amendment is processed in the National Assembly.