[Opinion] Expectations for the Amendment to the Electronic Financial Transactions Act Leading the Institutionalization of Digital Innovation Finance

Electronic Financial Transactions Act Unchanged for 15 Years, Failing to Embrace Innovative Digital Financial Services
Urgent Passage of Amendment Needed to Protect Financial Consumers and Promote Digital Innovation Finance
Innovative Services Once Stalled by Social Conflicts Must Now Establish Successful Cases Within the System

Professor Byungjun Yoo, Department of Business Administration, Seoul National University

It has now been over a year since the time spent with COVID-19 began. The pandemic, which started in January last year, has changed every corner of our daily lives in just one year. We have become accustomed to non-face-to-face communication along with masks, and people's movement has decreased, reshaping the offline commercial landscape. Many aspects of economic activities have shifted online, and a large portion of consumption has moved to the e-commerce market. Coupang's listing on the U.S. stock market and its market capitalization, which once exceeded 130 trillion won, are clear examples of these changes. As a researcher of internet industries and innovative services, I also feel overwhelmed by the rapid pace of digital transformation evolving through data and artificial intelligence (AI). However, there is a digital law that has remained unchanged for as long as 15 years: the Electronic Financial Transactions Act.

Digital innovation in finance is a core part of economic activities, making it crucial not only for public convenience but also industrially important. The spread of e-commerce, which has become a pillar of our daily lives during COVID-19, was possible thanks to Korea's solid logistics infrastructure and digital financial infrastructure such as easy payment systems. Already in 2019, the scale of easy payments exceeded 120 trillion won, and it is expected to have increased even more explosively last year. Moreover, with the MyData project now being actively promoted, conditions are being established to utilize various data, including unstructured data, in the financial sector. However, the legal framework for digital finance remains stuck in the PC era and does not function as an institutional foundation for the various emerging techfin services.

Since discussions on revising the Electronic Financial Transactions Act began last year, various concerns and expectations have been exchanged among related industries, government departments, and academia. Along with disagreements about the limitations of the basic law for digital finance and fairness with existing financial regulations, conflicts between the Financial Services Commission and the Bank of Korea have added complexity, leaving the bill to reorganize digital innovative finance still adrift. The fintech industry, which is the main subject of this revision and leads digital innovative financial services, acknowledges that the amendment increases the industry's burden but agrees with the purpose of establishing a legal framework for financial consumer protection and industrial development, urging the prompt passage of the amendment. Since the industry subject to regulation is ready to accept the amendment, other stakeholders involved also need to restart discussions from a broader perspective.

Korea's e-commerce market ranks among the top five globally and is a market where the most innovative companies compete. Alongside this global e-commerce market, innovative techfin services are emerging and growing. However, due to the essential nature of innovation that solves the shortcomings of existing services and businesses, social conflicts are inevitable. Many services have already crossed high market barriers but failed due to unresolved conflicts among various stakeholders. The Electronic Financial Transactions Act, which has not been revised for 15 years, is also a case that has not advanced due to unresolved conflicts. Since many discussions have already been underway since last year, and before the global techfin companies' offensive intensifies further, it is hoped that the amendment will be passed promptly so that indigenous techfin companies can continue their innovation. Without consensus from all parties, the current unanimous administrative practice, which causes innovation and improvement efforts to repeatedly fail, will render the nurturing of future new industries and securing global competitiveness empty rhetoric. Bold decisions and initiatives from the government and society are urgently needed.

Byungjun Yoo, Professor, Department of Business Administration, Seoul National University