[Exclusive] Fintech Industry Urges Lee Jae Myung to Establish Compensation Mutual Aid for 'Second TMEP, Ballan' Incidents and Improve ID Decree to Prevent Voice Phishing

"Mandatory Mutual Aid Association Membership Will Regulate Unlicensed PG Companies and Expel Poorly Managed Firms"
"Applying Fintech Biometric Technology to ID Cards Can Prevent Voice Phishing Using Stolen IDs"

The fintech (financial technology) industry has called on the Democratic Party of Korea to establish a legal basis for the creation of a compensation mutual aid association to cover electronic financial accidents such as the 'TMEP (Tmon·Wemakeprice) and Ballan incidents' if Lee Jae Myung is elected in the 21st presidential election. The industry has also urged for an amendment to the Enforcement Decree of the Resident Registration Act so that electronic financial service providers and fintech companies can apply biometric information technology to the ID verification network, in order to prevent financial crimes such as voice phishing using stolen IDs.

Lee Jae Myung, the presidential candidate of the Democratic Party of Korea, is giving a speech at the 'Revolution of Light' campaign rally held at Cheonggye Plaza in Seoul on May 12, 2025, marking the official start of the 21st presidential election campaign. Photo by Kim Hyun Min

According to the financial sector on May 15, the fintech industry plans to submit eight policy proposals at the 'Democratic Party of Korea-Innovative Venture Organizations Policy Agreement Ceremony' to be held at the Korea Venture Business Association in Guro-gu, Seoul, that afternoon.

First, the industry proposed to the council and the Democratic Party of Korea that a legal basis be established for a compensation mutual aid association for electronic financial transaction accidents. The pending partial amendment to the Electronic Financial Transactions Act (EFTA) in the National Assembly stipulates that payment gateway (PG) operators must have 100% of their settlement funds managed by an external institution. The EFTA also requires prepaid electronic payment instrument issuers (prepaid operators), who issue prepaid cards and gift certificates, to have 50% of their prepaid reserve funds managed by an external institution.

The industry pointed out that the 100% settlement fund management requirement for PG operators is excessively high. They also criticized the double regulation imposed on small overseas remittance operators who have a 0% accident rate. The industry suggested that, instead of imposing blanket excessive regulations, a legal basis should be established for the creation of a (tentatively named) electronic financial transaction accident compensation mutual aid association under the EFTA, to prepare for financial accidents related to simple payment services. Establishing a legal basis for the mutual aid association would make membership mandatory, which could prevent illegal operations by unlicensed PG companies and expel poorly managed companies from the market, thereby enhancing the self-regulatory effect of the industry.

The industry also argued that a statutory organization related to the mutual aid association should be established. By requiring the statutory organization to pay mutual aid contributions, the burden of managing settlement funds and prepaid reserves for electronic financial service providers by external supervisory agencies could be reduced, and the liquidity of contributions could be increased, thereby lowering fees. They believe that even if another 'TMEP, Ballan incident' occurs, the mutual aid system could simplify the consumer compensation process.

The industry also proposed amending the Enforcement Decree of the Resident Registration Act to introduce fintech technology into the ID verification network to block financial crimes affecting ordinary citizens. The industry pointed out that, compared to banks, non-bank institutions, securities firms, and small and medium-sized financial institutions, the fintech sector's response to voice phishing crimes?such as those involving simple remittance services?is slower, and the scale of damages is increasing more rapidly. However, they noted that relevant authorities are dispersed among financial supervisory agencies and the police, making it difficult to respond quickly. According to the Financial Supervisory Service, damages from voice phishing in the fintech sector, including simple remittance services, have been increasing every year: 78 million won in 2018, 114 million won in 2019, 1.47 billion won in 2020, 2.55 billion won in 2021, and 4.21 billion won as of June 2022.

The industry requested that regulations be relaxed to allow the use of fintech technologies such as biometric identification by changing the basis for using the ID verification network under the Enforcement Decree of the Resident Registration Act. According to the industry, currently, only 'financial companies, etc.' as defined under the Real Name Financial Transactions Act may use the network at the discretion of the Minister of the Interior and Safety. The industry urged that the definition of 'financial companies, etc.' be amended to include electronic financial service providers. Once the decree is amended and electronic financial service providers are allowed to use the network, it will become possible to fundamentally block the creation of suspicious accounts using stolen IDs. In addition, by utilizing biometric information and other fintech technologies, the cost of fraudulent activities for financial criminals will increase, while their options for fraudulent methods will decrease.

In addition, the industry also proposed to the council and the Democratic Party of Korea: ▲ promoting AI-based innovation in the fintech industry ▲ facilitating the comparison and recommendation of financial products ▲ promoting new types of securities and institutionalizing token securities (STO).

The industry also suggested three ways to advance existing policies. A long-standing wish of the industry is to expand the use of MyData for the government-backed policy loan product, Sunshine Loan. According to the industry, Sunshine Loan is available to those with an annual income of 35 million won or less and a credit score in the bottom 20%. However, even if individuals with low or medium credit apply for loans through financial platforms, they cannot know whether they are eligible for Sunshine Loan. As a result, low-income individuals are often forced to use loan products from other financial institutions that have relatively higher interest rates.

The industry called on the council and the Democratic Party of Korea to establish regulations allowing MyData service providers to check whether an applicant is eligible for Sunshine Loan and to notify them of their eligibility. The industry expects that this will expand the pool of beneficiaries of low-interest policy funds and reduce the interest burden on low-income individuals.

An industry official said, "If the political community accepts our proposals regarding the establishment of a compensation mutual aid association, improvements to the ID verification network regulations, and the expansion of MyData service eligibility, and if the relevant laws are amended, it will significantly reduce regulatory costs for the industry and help prevent financial crimes affecting ordinary citizens."

The industry also plans to submit similar proposals to the People Power Party and pursue the signing of a policy agreement. However, the date and details of the agreement ceremony have not yet been determined.