Fintech Policies Falling Short Compared to China... Yoon Government Needs 'Deregulation and Amendments to the Electronic Financial Transactions Act'

China Enforces Negative Regulation, Korea Positive Regulation
Industry Development Impossible

The 'Same Act, Same Regulation' Claimed by Banks
Blocks Fintech Industry Growth

Amend the Jeongeum Act to Grant 'New Type License' to Fintech

[Asia Economy Reporter Sim Nayoung] "Our country's digital finance regulations are based on a positive system, meaning only permitted businesses can operate. This is inferior to China's negative regulation system, which allows everything except what is prohibited."

Professor Kim Daejong of the Department of Business Administration at Sejong University diagnosed Korea's digital finance industry this way at the May 14th discussion forum titled 'Tasks for a Paradigm Shift in Digital Finance,' emphasizing that the newly launched government in May should take the lead in deregulation. The seminar was hosted by Korea University Technology Law Policy Center and the Korea Fintech Industry Association.

Professor Kim said, "China has no restrictions on industrial capital holding bank shares, nor sectoral regulatory barriers. China is ahead of Korea, which has sectoral barriers under the Electronic Financial Transactions Act and only recently relaxed the separation of banking and industry regulations."

Regarding the 'tilted playing field' issue, where banks claim fintech and big tech companies engage in banking-like activities without regulation, he said, "This is being misused as a rationale for strengthening fintech regulations."

He emphasized, "Kakao Bank and K Bank have obtained internet-only bank licenses and are subject to legal business regulations, and they already mediate financial product sales under the Financial Consumer Protection Act. Fintech companies do not directly develop or sell financial products, so regulatory arbitrage that does not consider functional differences is a mistake."

There was also a call to amend the Electronic Financial Transactions Act to foster the fintech industry. Lawyer Hwang Hyunil of Sejong Law Firm said, "The amendment should allow small postpaid payments by prepaid service providers and introduce a new license system called comprehensive payment service providers."

Lawyer Hwang suggested reconsidering the 'same function, same principle' concept as 'same risk, same regulation.' In other words, applying the same regulations to industries with different characteristics is inappropriate. He said, "From a consumer protection perspective, traditional finance argues that platform finance could cause broader consumer harm, but fintech actually reduces consumer harm because financial companies are involved again at the contract stage."

He added, "From an industrial perspective, platform finance companies should be nurtured for consumer benefits, and for this, tailored licenses should be introduced rather than incorporating them into existing financial regulations."

Park Jooyoung, Director of Financial Innovation at the Financial Services Commission, said, "Consumer welfare is the most important. Rather than a tilted playing field, both sides should compete fairly on a raised playing field to create quality jobs."