Controversy Over Jeongeumbeop's 'Concurrent and Ancillary Business' Provisions, Moving Toward Post-Approval (Comprehensive)

Advance Submission Under the Amendment Pre-Notification System
Suggestions for Relaxation Presented at the Political Affairs Committee

National Assembly Building=Yonhap News

[Asia Economy Reporter Kiho Sung] The pre-notification system for concurrent and ancillary business, which has been another controversial issue in the amendment to the Electronic Financial Transactions Act (EFTA), is increasingly likely to be relaxed to a post-approval system. This item has been consistently requested by big tech (large information and communication companies) and the fintech industry, drawing attention to what conclusion will be reached during the bill review process.

According to the financial and political sectors on the 7th, the National Assembly’s Political Affairs Committee, which is reviewing the EFTA amendment, recently suggested in the ‘alternative discussions and review opinions’ of the related bill that the pre-notification obligation for concurrent and ancillary business be relaxed to post-reporting.

The EFTA amendment, which was expected to be discussed in the National Assembly last month, has been postponed to the next session due to differences of opinion between the Financial Services Commission and the Bank of Korea regarding the mandatory external settlement. As the conflict between the FSC and the BOK intensified, the pre-notification system for concurrent and ancillary business, another contentious issue, was excluded from the debate.

Under the existing EFTA, electronic financial service providers are prohibited from engaging in concurrent businesses other than designated ones. However, the newly proposed amendment changes the regulation so that electronic financial service providers can only engage in foreign exchange business, postpaid payment business, telecommunication billing services, identity verification agency business, period communication services, special types of value-added communication services, and other businesses prescribed by Presidential Decree.

In response, the fintech industry has continuously advocated for changing the concurrent and ancillary business system from pre-notification to post-approval. They argue that the pre-notification system contradicts the main direction of the EFTA amendment, which aims to activate the entry of innovative businesses into the financial industry, promote competition and innovation in digital finance, and foster related industries healthily.

However, as the Political Affairs Committee conducting the bill review leans toward post-reporting, it is highly likely that this change will be reflected in the next bill review. Additionally, the FSC, which had previously taken a clear opposing stance, is reportedly considering a relaxed approach to this matter. The FSC had expressed concerns that if electronic financial service providers broadly engage in concurrent and ancillary businesses, the principle of separation between industry and finance could be compromised.

The fintech industry insists that along with the post-approval system for concurrent and ancillary business, the amendment should shift to a negative regulation system. The current law defines businesses that electronic financial service providers cannot concurrently engage in by a negative method, but the amendment lists allowable concurrent businesses in a positive manner, interpreting that other businesses are not permitted, which has sparked controversy.

A fintech industry official said, "Even in global economic powers such as the United States and China, which account for the majority of unicorn companies, the negative system is reflected," adding, "Contrary to the purpose of the EFTA amendment, the concurrent and ancillary business provisions will become shackles that hinder innovative ideas and attempts."

Ryu Young-jun, Chairman of the Korea Fintech Industry Association, also appealed at the EFTA amendment public hearing held in February, saying, "In line with the purpose of the EFTA amendment, regulations on concurrent businesses should be relaxed from a positive to a negative system, and ancillary businesses should be relaxed to post-notification to increase the freedom of the fintech industry and enable rapid response to technological and era changes."