Deliberation on Measures to Revitalize Platform Financial Services at the 2nd Financial Regulation Innovation Meeting
Approval of Pilot Operation for Online Brokerage of Deposit, Insurance, and P2P Products
On the afternoon of the 23rd, Kim Ju-hyun, Chairman of the Financial Services Commission, reviewed measures to revitalize platform financial services and strengthen the regulatory sandbox with Park Byung-won, Chairman of the Financial Regulatory Innovation Meeting, and 16 private committee members at the 2nd Financial Regulatory Innovation Meeting held at the Government Seoul Office in Jongno-gu, Seoul.
[Asia Economy Reporter Song Hwajeong] In the future, consumers will be able to use various financial and non-financial services through financial companies' platforms. Integrated management of tax and utility bills will be possible through bank apps, and the scope of digital healthcare services that insurance companies can provide will also be expanded. Additionally, online brokerage services for deposits, insurance, and online investment-linked finance (P2P) products will be pilot-operated.
According to the Financial Services Commission on the 23rd, the Financial Regulatory Innovation Meeting held its second session that day to review measures to revitalize platform financial services and to enhance the regulatory sandbox.
Financial Services Commission Chairman Kim Joo-hyun said in his opening remarks, "These two tasks are urgent for digital innovation in finance amid the rapid digitalization and platformization across the economy," adding, "Considering that institutional measures to prevent side effects brought by platform businesses must be supported to maximize consumer benefits, we have prepared supplementary measures such as ensuring algorithm fairness, preventing incomplete sales, depositing compensation guarantees, and preventing abuse of dominant platform positions." Chairman Kim emphasized, "Conflicts of interest inevitably arise during regulatory innovation, but the goal of regulatory innovation is 'innovation for consumers.' We expect that this measure will lead to autonomous innovation through healthy competition among financial companies, fintech, and big tech in the digital transformation sector, greatly enhancing consumer benefits."
Financial Supervisory Service Governor Lee Bok-hyun said, "In the process of activating platform finance, management and supervision of algorithms are the most important issues for protecting financial consumers," and added, "Going forward, the Financial Supervisory Service will continuously monitor the appropriateness of algorithms to prioritize financial consumer interests."
Support for Activation of Financial Company Platforms... Banks to Build 'Digital Universal Bank', Insurance to Build 'Healthcare Financial Platform'
The financial authorities plan to establish a foundation for financial companies to develop into financial platforms by rationalizing restrictions on business scope and subsidiary investment regulations. First, for banks, conditions will be created to leap into digital universal banks that can provide customized financial and non-financial services using extensive data. To this end, the scope of platform-related business for banks will be expanded. Until now, strict ancillary business regulations made it difficult to provide various platform-related services. Going forward, the interpretation of whether platform-related services fall under ancillary business will be flexible to allow various platform services. This will enable integrated management of National Pension subscription details, health insurance payment records, tax and utility bills, etc., through bank apps. In addition, identity verification services that identify and authenticate users online (such as membership registration and financial transactions) using alternative means instead of resident registration numbers, as well as platform services that integrate supply chain management (purchase, contract, ordering) and financial services (transfer, remittance, loans) for corporate customers, will be possible.
The Financial Services Commission plans to continuously expand the scope of business and simplify related procedures through future legislative amendments.
Integrated app operation will also be allowed as ancillary business. Previously, there was legal uncertainty about whether banks could operate integrated apps providing services of affiliates such as insurance, cards, and securities as bank business and whether this constituted brokerage under the Financial Consumer Protection Act (FCPA). The Financial Services Commission will allow integrated app operation through interpretation first and reflect it in legislation later. Furthermore, if banks do not involve themselves in affiliate product solicitation or contract conclusion and the possibility of misunderstanding the sales entity is low, it will not be considered brokerage under the FCPA. The criteria for determining brokerage under the FCPA will be clarified, and affiliate non-financial services will also be allowed to be linked and provided. The same interpretation and application will apply when insurance and card companies operate integrated apps.
Information sharing among bank affiliates will be allowed without separate procedures such as ancillary or concurrent business reporting if the customer consents. However, under the Personal Information Protection Act and Credit Information Act, the content and purpose of the information provided must be sufficiently explained and guided so that customers can fully understand. If the customer does not consent or withdraws consent, information provision cannot be made.
A Financial Services Commission official explained, "Considering regulatory fairness with other industries such as big tech, fintech, telecommunications, and distribution, where information use is free with customer consent."
For insurance, the scope of digital healthcare services that insurance companies can provide will be expanded to support the establishment of a 'Healthcare Financial Platform.' Accordingly, services such as health statistics analysis will be possible within the scope that does not constitute medical practice. Various healthcare tasks will be allowed for healthcare subsidiaries, enabling health management services for individuals and companies, wholesale and retail of healthcare-related goods, software development and sales, and facility operation.
Additionally, the reward payment limit proportional to the health management efforts of insurance policyholders will be raised from the current 30,000 KRW to 200,000 KRW. Comprehensive financial services within the healthcare platform will also be promoted. Insurance companies' participation in open banking will be allowed, and when the Electronic Financial Transactions Act is amended, permission for insurance companies to engage in payment instruction transmission business (My Payment) will be pursued.
For cards, to support the establishment of a 'Life-Integrated Financial Platform,' the scope of ancillary business that credit finance companies can operate without notification will be expanded. Credit finance companies will be allowed to use corporate and legal entity information without consent, similar to other industries (only requiring consent for personal information), and legal amendments will be considered to allow card companies as MyData operators to recommend other card company products suitable for customer situations.
Through authoritative interpretation, systematic integrated app operation within holding companies will be enabled by allowing holding companies to plan, develop, manage, and maintain integrated apps. In the mid-to-long term, legislative amendments will be considered to allow holding companies to directly operate integrated apps.
Pilot Operation of Online Sales Brokerage for Deposits, Insurance, and P2P Products... Through Designation as Innovative Financial Services
Online brokerage for financial product sales will be pilot-operated. Currently, services that compare and recommend various financial products to consumers are considered financial product brokerage and require registration or licensing. However, except for loan products, registration systems considering the characteristics of online platforms have not been established, making service provision difficult. The Financial Services Commission will allow pilot operation of online sales brokerage for deposits, insurance, and P2P products through designation as innovative financial services. However, considering concerns about principal loss and incomplete sales for fund products, the commission plans to observe the pilot operation results for deposits and insurance for about six months before reviewing licensing for investment brokerage for platform companies.
By product, deposits will be allowed for pilot operation of online services that compare and recommend deposit products from multiple financial companies, not only by tech companies but also by financial companies. Among deposit-type products under the FCPA, regular savings and installment savings products will be allowed, and products from banks as well as savings banks and credit unions will be handled. Special deposit products with variable returns, such as equity-linked deposits (ELD), will be excluded.
For insurance, MyData operators and electronic financial operators will be allowed to pilot online services that compare and recommend insurance products from multiple insurance companies. Financial companies such as banks can register as insurance agencies through the bancassurance system. The coverage excludes products with complex structures or high-value contracts that pose significant consumer damage risks, such as whole life, variable, and foreign currency insurance. Within the allowed coverage, products for face-to-face, telemarketing (TM), and cyber marketing (CM) can all be handled.
A Financial Services Commission official said, "Since there are concerns about financial market stability and consumer protection, we will carefully check risk factors while pilot-operating under certain conditions."
The Financial Services Commission has also prepared risk mitigation measures related to consumer protection. To enhance consumer protection in integrated app operation, the sales entity will be clearly informed to prevent consumer confusion or misunderstanding, and consumer protection systems such as complaint and dispute resolution procedures, information protection, and security will be mandated. If damage occurs due to failure to notify the sales entity or unfair labeling/advertising, the integrated app operator will bear joint compensation responsibility with the sales entity.
A 'multi-layered management system' for platform business risks will be established. The Financial Supervisory Service will inspect whether financial companies entrusting sales to platforms properly control and manage risks and recommend improvements if necessary. Existing regulations on sales brokerage operators under the FCPA, such as internal control standards, explanation obligations, and prohibition of unfair solicitation, will apply to platforms. Considering platform characteristics, new regulations for consumer protection, prevention of unfair acts, and financial market stability will be applied, including restrictions on handled products to prevent incomplete sales, obligations to ensure fairness of comparison and recommendation algorithms, and prevention of abuse of dominant positions by platforms over insurance companies. These will be reflected in entry requirements and additional conditions when designating innovative financial services.
To prevent sudden money moves during online deposit product brokerage, platform sales will be allowed within a certain limit of the previous year's recruitment amount per financial company (5% for banks, 3% for savings banks and credit unions). Obligations such as disclosure of recruitment performance and fees per financial company, deposit of business guarantee deposits (100 million KRW), or subscription to liability insurance will be imposed. When handling insurance products on online platforms, deposit of business guarantee deposits for compensation of illegal acts will also be mandatory.
Enhancement of Financial Regulatory Sandbox... Restructuring of Review System
The review system will be restructured to enhance the financial regulatory sandbox. A co-chair from the private sector will be newly established to allow private members to autonomously judge based on expertise and objectivity. An 'Innovative Finance Expert Support Group' composed of legal and patent experts will be formed to complement the expertise of the Financial Services Commission and Financial Supervisory Service working groups and support prompt and accurate reviews.
To improve the stability and predictability of system operation, the direction after the expiration of special measures will be notified early so that the market can sufficiently prepare, and a preemptive response system for business suspension risks will be established. The Innovation Committee and Financial Services Commission must notify businesses of the future handling direction, including institutionalization, at least three months before maturity.
While focusing on supporting preliminary fintech, the support system will be restructured to strengthen the responsibility of innovative businesses. A responsible person designation system will be operated by assigning a person in charge for each fintech business, and for businesses already designated as innovative financial services, measures to ensure responsibility will be prepared so that services can be launched and operated promptly.
The Financial Services Commission plans to immediately implement measures such as authoritative interpretations that can be enacted immediately and to swiftly proceed with legislative amendments, guideline preparations, and consultations with related agencies. Reviews for expanding the scope of ancillary business for bank platforms will be conducted in the second half of the year, and innovative financial service reviews for pilot operation of deposit, insurance, and P2P brokerage will be held in October.
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