Prepaid Recharge Funds Must Be Deposited, Entrusted, or Covered by Guarantee Insurance
Investments Limited to Safe Assets Like Government Bonds and MMFs
'Electronic Financial Transactions Act Amendment' Passes National Assembly Legal Review Subcommittee
No Disagreements Between Ruling and Opposition Parties, Expected to Pass National Assembly Plenary Session Soon
"Is Merge Point basically a lost cause now? It's been almost two years since I requested a refund, but there's no call from customer service, only robot chat consultations, which is so frustrating." "I lost 170,000 won too, so I gave up." "So refunds really aren't possible, huh." (On the 26th, a mom cafe in Daejeon on a portal site)
Prepaid payment amounts used in everyday life by the public, such as online payments and remittances, large franchise coupons, fuel gift certificates, and transportation recharge cards, are now protected by law. Until now, prepaid service providers were not subject to management regardless of how they invested or used the prepaid funds received from customers in advance. The Merge Point incident in August 2021, which suddenly reduced usage options and caused a refund crisis, happened because prepaid service providers were in a legal blind spot.
Protection of Prepaid Recharge Funds is Key
According to the Financial Services Commission on the 27th, the 'Electronic Financial Transactions Act Amendment Bill' containing these provisions passed the National Assembly's Legislation and Judiciary Committee Subcommittee on the 24th. Since there is no disagreement between the ruling and opposition parties, it is expected to pass the plenary session of the National Assembly soon.
The core of the bill is to protect the prepaid recharge funds entrusted by customers. First, prepaid service providers must deposit or entrust a certain portion of the total recharge funds with financial institutions or subscribe to guarantee insurance. The remaining recharge funds are allowed to be invested by the prepaid service providers. However, investments are limited to safe assets such as government and public bonds or money market funds (MMFs) to prevent potential losses.
A Financial Services Commission official said, "Until now, there was no proper way to sanction prepaid service providers investing customers' recharge funds in real estate, virtual assets, stocks, or affiliated companies," adding, "Once the law passes, the deposits to be returned to customers will be managed safely."
Customers will also have transparent disclosure of any leftover prepaid recharge funds. The official explained, "Even if people pre-purchase 10,000 won worth of points or gift certificates, they often cannot use them all, which is called 'nakjeon (落錢) income' from the business perspective," adding, "With legal binding to inspect and disclose how recharge funds are managed quarterly, the amount of such nakjeon income will also be known."
Prepaid Service Providers with Capital of 2 Billion Won or More are Subject to Regulation
Representative businesses subject to regulation include KakaoPay (Kakao Money), Naver Pay (point recharge), Toss (easy remittance), as well as large franchise companies like Twosome Place and Paris Baguette, and oil companies issuing fuel gift certificates such as SK Innovation, GS Caltex, and Hyundai Oilbank. More precisely, prepaid service providers with capital of 2 billion won and equipped with human and physical facilities are subject to regulation.
However, the Financial Services Commission is also considering excluding small-scale businesses with a small total issuance balance from regulation.
According to the Bank of Korea, the amount used for prepaid electronic payment methods is estimated at 222 trillion won from the first to third quarters of last year. It has increased explosively during the COVID-19 period. It was 62 trillion won in 2019, 97 trillion won in 2020, and 100 trillion won in 2021.
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