Korea's Financial Service Commission is introducing new rules that will force the nation's banks to open their payment systems to third party fintech firms in a move designed to increase competition and promote innovation in the sector.
The current financial payment network has a closed system accessible only by banks. Although banks jointly launched an open API system in August 2016, access has been limited only to small fintech firms, charging relatively high fees, about KRW400 to 500 per transaction.
Under the FSC's plans, established banks must open their payment network to all fintech payment service providers as well as other banks. That would enable customers to use a single application to access their accounts at different banks and make payments. Fees charged on fintech firms for using the network will be lowered to one tenth of the current level to ensure fair competition.
Alongside this, amendments to the coutnry's Electronic Financial Transaction Act will mandate all banks to offer payment service providers with standardised APIs for money transfer. It will also prohibit banks from any discriminatory action against payment service providers using their payment system in processing money transfer and charging fees.
In the medium to long term, the FSC says it will consider allowing qualified fintech payment service providers direct access to the payment system without relying on banks’ services.
The FSC also plans to overhaul the current regulatory framework on electronic financial business to promote innovation and competition in financial payment services.
"The Electronic Financial Transaction Act, adopted in 2007, has limitations in keeping up with digital transformation in the past 10 years and reflecting new developments in payment services," states the regulator. "The current regulatory framework, therefore, will be overhauled to embrace more flexibility and scalability in response to the emergence of diverse financial payment services."
Under the new regulatory framework, licenses on electronic financial business will be granted on a business-function basis, rather than a business-sector basis, to better reflect diversification of payment services sector, for example via payment initiation service providers and e-money business providers.
The FSC says it will submit proposals to amend the Electronic Financial Transaction Act in the third quarter of 2019.