[New Financial Hegemony War] Government Ministries, Financial Sector Clash with Labor Unions Joining... No Exit in Sight for Jeongeum Act

Financial Services Commission and Bank of Korea Clash Over Supervisory Authority
Industry Debates 'Same Work, Same Regulation'
Labor Unions Also Raise Voices Separately

[Asia Economy reporters Kiho Sung and Jinho Kim] The conflict between traditional financial companies and big tech (large information and communication companies) and fintech over the easing of entry barriers to financial services has yet to find a solution. The amendment to the Electronic Financial Transactions Act, which allows big tech and fintech to provide financial services and includes corresponding regulations, has regained attention due to the 'Merge Point incident,' but discussions in the National Assembly remain at a standstill. This is because the industry is clashing over whether it is a special privilege or consumer convenience priority, and the dispute has escalated into a power struggle between the Bank of Korea and the Financial Services Commission over payment and settlement authority. With strong opposition even from labor unions, the sharp conflicts among stakeholders make it difficult to reach an agreement on the amendment.

The Electronic Financial Transactions Act Entangled with Government Ministries

According to the National Assembly Legislative Information System on the 7th, several related bills, including amendments to the Electronic Financial Transactions Act proposed separately by former Chairman Yoon Kwan-seok and Justice Party lawmaker Bae Jin-gyo, are currently pending in the National Assembly's Political Affairs Committee. In particular, although former Chairman Yoon's bill was proposed in November last year, it has never been discussed in the relevant standing committee, the Political Affairs Committee. The stagnation of the amendment is centered on the brinkmanship between the Bank of Korea and the Financial Services Commission. The amendment proposed by the Financial Services Commission mandates that personal transaction details conducted by big tech be compulsorily provided to the Korea Financial Telecommunications and Clearings Institute (KFTC), and places the KFTC under the supervision of the Financial Services Commission.

The Bank of Korea has strongly opposed this, arguing that the Financial Services Commission's establishment of supervisory authority over the KFTC infringes on the Bank's inherent payment and settlement duties. According to political circles, the biggest reason why the amendment has not been discussed since it was submitted to the Political Affairs Committee in February is the lack of agreement between the two government ministries.

An opposition party member of the Political Affairs Committee said, "In most cases, government-led bills are coordinated to some extent with the ruling party beforehand," adding, "However, this bill was submitted without any prior coordination, so the government and ruling party need to resolve this issue first."

Recently, there are expectations that the amendment will gain momentum as Bank of Korea Governor Lee Ju-yeol and newly appointed Financial Services Commission Chairman Ko Seung-beom pledged to establish a cooperative system to resolve major issues during their meeting. However, it is pointed out that since the two leaders have only reached consensus on fundamental principles and have not agreed on the specific points of conflict, the potential for future disputes remains.

Financial Sector and Big Tech Battle for Survival... Labor Unions Join In

Even if an agreement is reached between government ministries, the rift between traditional financial companies and big tech is deepening. This is because they are uncompromisingly advocating different values: the principle of equal regulation for the same industry versus financial innovation.

The traditional financial sector opposes the passage of the amendment, pointing to the introduction of a comprehensive payment and settlement business license. They argue that if the bill passes, big tech will effectively engage in deposit and loan businesses such as account issuance, fund transfers, and payment of card bills and insurance premiums, while not being subject to the same level of regulation as financial companies.

They also claim that introducing the comprehensive payment and settlement business license will intensify big tech's financial monopoly. Labor unions of six regional banks, including Gwangju Bank, declared joint resistance, stating, "If the amendment is passed, regional funds will flow to large platforms, causing outflow of regional capital and harming small and medium-sized enterprises and small business owners." The National Financial Industry Labor Union has also clearly expressed opposition.

Big tech insists it is not a special privilege. They argue that even if the amendment passes, they cannot operate consumers' deposits, so it is difficult to consider comprehensive payment and settlement business as deposit and loan business. They also counter that the amendment imposes new obligations such as external clearing, increasing the burden on big tech. The KFTC labor union also supports the bill's passage, stating in a statement, "It clearly shows the minimum measures that must be taken under the Electronic Financial Transactions Act to protect consumers."

Experts point out that the controversy started because the amendment allows existing financial institutions to enjoy benefits while avoiding high regulatory costs and obligations. They say the absence of the 'same function, same regulation' principle has led to this situation.

Professor Jeon Sung-in of Hongik University's Department of Economics said, "Allowing big tech to perform banking-like functions under a different name is a special privilege," adding, "It is desirable to apply strong regulations to big tech, just like banks, focusing on consumer protection."

Professor Lee Min-hwan of Inha University's Department of Global Finance also said, "(The current amendment) indeed has so-called blind spots," expressing concern that "Although big tech's behavior of entering systems created by financial institutions and profiting may appear beneficial to consumers in the short term, ultimately, it could cause harm through special privileges."