Implementation to Begin Next Year
After Preparation Period Including System Development
Going forward, electronic payment gateway (PG) providers will be required to manage at least 60% of settlement funds externally through trusts or payment guarantee insurance. The Financial Supervisory Service has issued guidelines to ensure the safe management of settlement funds by PG companies in order to prevent a recurrence of incidents like the "second Tmon incident" (where Tmon and Wemakeprice failed to pay settlements).
On September 10, the Financial Supervisory Service announced the introduction of external management guidelines for PG company settlement funds to protect merchants ahead of the amendment and enforcement of the Electronic Financial Transactions Act.
The guidelines apply to 184 PG companies registered under the Electronic Financial Transactions Act as of September 3. PG companies will be given until the end of the year to prepare for implementation, including IT system development and signing trust or payment guarantee insurance contracts, with full enforcement beginning on January 1 of next year.
Previously, in July, the National Assembly’s Political Affairs Committee passed an amendment to the Electronic Financial Transactions Act that would gradually increase the external management ratio of PG company settlement funds to 100%. The bill is currently pending in the Legislation and Judiciary Committee.
The Financial Supervisory Service explained that the guidelines were established to prevent any regulatory vacuum in the field until the legal amendment passes the National Assembly.
The guidelines govern the entire process from the calculation to the external management and payment of settlement funds by PG companies. First, PG companies are required to calculate the settlement funds to be paid to merchants on a daily business basis.
The external management ratio is set at a minimum of 60% of the settlement funds. External management must be conducted solely through trusts or payment guarantee insurance. Any shortfall must be covered by the next business day.
In the event of bankruptcy or commencement of rehabilitation proceedings for a PG company, banks, insurance companies, or other settlement fund management institutions will be required to pay settlement funds directly to merchants.
When entering into a PG contract, PG companies must notify merchants of the external management method, information about the settlement fund management institution, and the reasons and procedures for payment. This information must also be provided on their website. This will ensure that, in the event of an emergency, merchants can directly claim payment from the settlement fund management institution without delay.
The Financial Supervisory Service expects that these guidelines will enable PG companies to safely manage merchants’ settlement funds externally, strengthen consumer protection for electronic financial services users, and enhance the stability of electronic payment settlements.
A representative from the Financial Supervisory Service stated, "We will continue to monitor the industry’s preparations for external management in accordance with the guidelines and collect feedback and suggestions regarding the implementation of the system in order to make further improvements."
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