Kakao Pay MyData Business Ultimately Stumbles Over 'Major Shareholder Eligibility'

Financial Authorities "In Consultation with Chinese Authorities"

[Asia Economy Reporter Seong Giho] Financial authorities have lifted the suspension on the review of Personal Credit Information Management Business (MyData) applications submitted by Fink, Hana Financial Investment, Hana Bank, and Hana Card, and have resumed the approval review. However, KakaoPay, which did not have any major shareholder eligibility issues identified during the first review process, was not included in the list. The variable for being included in the review list was ultimately confirmed to be major shareholder eligibility, deepening KakaoPay's concerns.

According to the financial sector on the 1st, the Financial Services Commission held a regular meeting the previous day and decided to resume the review for four Hana Financial Group affiliates?Hana Bank, Hana Financial Investment, Hana Card, and Fink?among the six businesses whose MyData approval reviews had been suspended.

The decision to resume the review hinged on the issue of major shareholder eligibility. The major shareholder of the four companies mentioned above, Hana Financial Group, is under investigation by prosecutors related to the 2017 political scandal. However, the Financial Services Commission explained that although criminal proceedings have begun, no subsequent procedures have occurred for 4 years and 1 month, and they took this into consideration. They acknowledged that it is difficult to reasonably predict when this process will end. On the other hand, the suspension of reviews for Gyeongnam Bank and Samsung Card will continue. Currently, Gyeongnam Bank’s major shareholder is undergoing a second trial in a criminal case, and Samsung Card’s major shareholder (Samsung Life Insurance) is also undergoing sanction procedures.

Regarding the controversial KakaoPay, financial authorities explained that it is neither under suspension nor on hold. A Financial Services Commission official stated, "KakaoPay is still under review and is in consultation with Chinese authorities."

KakaoPay applied for a preliminary MyData approval review in December last year but was put on hold due to incomplete submission of documents regarding whether its second-largest shareholder, Alipay Singapore Holdings, was subject to sanctions by Chinese authorities. The financial authorities’ major shareholder eligibility review targets shareholders holding 10% or more of shares. KakaoPay’s shareholding structure is 56.1% by Kakao and 43.9% by Alipay.

Financial authorities maintain that the major shareholder eligibility issue of KakaoPay must be resolved first. Consequently, it is pointed out that KakaoPay can practically do nothing related to the MyData business. Previously, in the case of Naver Financial, concerns arose about the possible suspension of approval review when its major shareholder, Mirae Asset Daewoo, came under prosecution for violating the Foreign Exchange Transactions Act. However, Mirae Asset Daewoo announced that it would convert some of Naver Financial’s common shares into non-voting convertible preferred shares, reducing its shareholding to 9.5%, and the financial authorities accepted this, allowing the business rights to be secured. However, in Alipay’s case, internal turmoil due to pressure from Chinese authorities makes adjusting the shareholding ratio difficult.

An industry insider said, "Because of the issues surrounding Jack Ma, the founder of Alibaba Group, Alipay is in disarray, so even if they try to reduce their shareholding, it is questionable whether someone who can represent them will emerge from the Chinese side," adding, "Ultimately, we can only wait and see the decision of the financial authorities."