[Asia Economy Reporter Buaeri] The Financial Services Commission's announcement of amendments to the Enforcement Decree of the Financial Consumer Protection Act has sparked backlash from the fintech industry. They argue that grouping prepaid and simple payment services that do not charge annual fees with credit cards that do is unreasonable and will ultimately harm consumers.
According to financial circles on the 2nd, the Korea Fintech Industry Association and the Korea Internet Corporations Association plan to submit related opinions to the financial authorities next week. If the decree passes, about 100 companies including fintech and e-commerce firms will be subject to this regulation.
'Same Service, Same Regulation' Applied to Simple Payments
The Financial Services Commission has announced a legislative notice by the 16th to amend the Enforcement Decree of the Financial Consumer Protection Act, requiring prepaid and debit payment methods (including electronic payment methods) to fulfill explanation obligations for linked services and to notify six months in advance of any reduction or change in linked services.
Currently, prepaid and debit cards are not classified as financial products under the Financial Consumer Protection Act, unlike credit cards, so these regulations have not applied. Once the decree is enforced, fintech companies will also be required to notify six months in advance and fulfill explanation obligations when reducing or changing linked services, just like credit card operators.
The Financial Services Commission stated that since prepaid payment fintechs function similarly to credit cards, it is appropriate to apply related regulations to fintechs to strengthen financial consumer protection. The Commission explained, "This is to prevent unreasonable reductions or changes in linked or affiliated services that could influence consumers' choices and to protect consumers' trust."
"No Annual Fees, Yet..." Fintech Industry Boils
The fintech industry argues that applying the same regulations is unreasonable because their structure is fundamentally different from credit cards.
Credit card companies charge annual fees ranging from 20,000 to 30,000 KRW for basic membership management and partnership service fees, and up to 2 million KRW for premium cards. Since consumers pay these fees expecting certain service benefits, if the card company unilaterally changes policies and consumers no longer receive these benefits, consumers could be harmed. Therefore, prior notification obligations are necessary to protect consumers.
On the other hand, according to the fintech industry, prepaid and simple payment services do not charge annual fees like credit cards. For example, fintech companies fully bear the cost of providing discount coupons for Baedal Minjok as a form of marketing promotion. A fintech industry representative said, "Applying the same regulatory standards simply because they are payment methods, ignoring their characteristics and differences, is an unreasonable legal amendment," and added, "It's like requiring a 1+1 promotion at E-Mart to be notified six months in advance," expressing strong opposition.
Why Only Card Industry Opinions... Ultimately Consumer Harm Too
Traditional financial companies such as card firms have consistently argued that the same regulatory principles should apply to all platforms providing payment services. The financial authorities' recent move is interpreted as accepting this stance. Another fintech industry representative said, "Given the situation, some say that since Kim Joo-hyun, a former chairman of the Credit Finance Association, became the Financial Services Commission chairman, there might be internal bias."
There is also concern that marketing events may be reduced, decreasing benefits for consumers. Fintech companies provide marketing benefits such as point accumulation when payments are made using their payment methods at small business shopping malls. If the enforcement decree applies and prior notification obligations are imposed, such promotions and marketing activities are likely to shrink.
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