[1mm Financial Talk] Data Center Fire Fallout... KakaoPay Unable to Apply for Regulatory Relief

Exclusion from Designation as Innovative Financial Service for Savings and Deposit Comparison Recommendations
Designated Companies Can Also Provide Comparison and Customized Recommendations
KakaoPay, Limited to Simple Comparisons, Faces Competitiveness Concerns

On the 16th, Gyeonggi Fire Investigation officials entered Building A of the SK C&C Pangyo Campus in Seongnam, Gyeonggi Province, where a fire occurred. The fire broke out at the SK C&C Data Center around 3:30 PM the previous day, causing services of server tenants such as Kakao and Naver to go down one after another. In particular, Kakao services including KakaoTalk Messenger, the Daum portal, KakaoT, KakaoPage, and KakaoPay experienced widespread outages, resulting in a nationwide "blackout" lasting about 10 hours. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Minwoo Lee] Kakao Pay was excluded from the regulatory relaxation targets for deposit and savings brokerage services by financial authorities. This exclusion occurred despite the fact that the related service had already been launched. It appears that concerns over stability arose following the recent Kakao outage incident. The fallout from the data center fire accident has spread.

According to industry sources on the 28th, the Financial Services Commission designated nine fintech and financial companies' online deposit product brokerage services as innovative financial services, temporarily lifting restrictions under relevant laws this month. This allows financial consumers to receive recommendations for deposit and savings products tailored to them. Previously, services that compared deposit and savings products were possible but were evaluated as merely listing products. This was because they only provided interest rate data disclosed on the Financial Supervisory Service’s consumer information portal 'One Look at Financial Products'. Currently, under laws such as the Financial Consumer Protection Act and the Banking Act, financial product sales agents and brokers are restricted from brokering the same type of financial products for multiple financial institutions.

However, with this innovative financial service designation, it has become possible to compare and recommend deposit and savings products in a personalized manner. The companies designated are BankSalad, NHN Payco, Zoom Internet, Gitple, Fink, Viva Republica (Toss), Naver Financial, CB Financial, and Shinhan Bank, totaling nine. These companies will be able to launch related services starting from the second quarter of next year.

Amid the anticipated full-scale competition, it is noteworthy that Kakao Pay, which has already started deposit and savings comparison services since September, was not included. Initially, Kakao Pay did not even participate during the application stage for this innovative financial service designation by the Financial Services Commission. This contrasts with their early launch of related services as a new business opportunity.

There are reactions that the KakaoTalk 'outage' incident triggered by the data center fire on the 15th of last month influenced this. At that time, Kakao Pay’s remittance and payment services were suspended following the fire accident. Authentication services linked to KakaoTalk, consultation services, and remittance notification messages experienced prolonged disruptions. These factors likely created a burden that prevented even applying.

A Financial Services Commission official stated, “Although Kakao Pay had already launched deposit and savings comparison services, it seems they did not apply for the innovative financial service designation due to concerns about the data center fire incident last month. Unlike loans, which handle financial institutions’ money, deposits and savings involve customers’ money, so stability is much more important.”

Companies designated as innovative financial services are expected to officially launch related services from the second quarter of next year according to the Financial Services Commission’s policy. They are anticipated to introduce personalized services such as recommending banks that offer preferential interest rates by utilizing customers’ financial information. The gap with Kakao Pay, which can only compare products, is expected to widen. A fintech industry insider explained, “It was expected that alongside the loan brokerage service, which has already established itself as a market leader, they would have ‘two wings’ with deposit and savings comparison and recommendation, but there has been a setback in the deposit and savings area.”