Discussion with the authorities on ‘regulation of investment in the Financial Industry Act’… Some suggestions on the ‘suitability principle’
Restrictions on registration of ‘affiliate solicitor’ platform… Continued filing of “relaxation”
Financial Services Commission “Discussions on equity investment regulations… Gathering opinions on revisions”
Seeking conversion to a platform business comparable to fintech companies amid deteriorating business conditions
The Financial Services Commission has begun revising the ‘Act on Structural Improvement of the Financial Industry (Financial Industry Act)’ for the first time in 40 years. In the midst of this, it is known that the card industry has additionally suggested opinions on deregulation related to exceptions to the Financial Consumer Protection Act. Among the ‘Six Principles of Sales’, it is an opinion that regulations should also be eased for sales activities. Attention is focusing on whether an agreement can be found regarding entry into the platform business along with restrictions on investment for non-financial companies.
According to the industry on the 24th, the Credit Finance Association recently delivered a policy proposal to the Financial Services Commission in relation to the ‘Exemptions to the Financial Consumer Protection Act’ in the midst of deregulation on the separation of banking and industry. The Financial Services Commission has formed a task force (TF) to listen to the voices of the industry and is discussing to prepare detailed policies.
An official from the Credit Finance Association said, “Since the beginning of this year, we have been making suggestions for exceptions to the Financial Action Act, which has been a barrier to entering ‘non-financial’ businesses such as the My Data (personal credit information management business) business.” “The current financial authorities and payment technology or platform We are looking for a revision of the law on the direction of releasing the limited part about entering new businesses such as new business,” he explained.
Currently, credit card companies are insisting on easing the 20% limit on equity investment and easing the financial consumer protection law. This is because of the provision that the six sales principles under the current Financial Consumer Protection Act must be observed on the affiliate solicitor screen. The industry is arguing that it is confusing because the IT platform business, which is considered as a new business search, is limited due to the Financial Action Act.
In accordance with the Financial Consumer Protection Act in March of last year, the Financial Services Commission considers the introduction or recommendation of financial products by credit card companies as an intermediary, not an advertisement, and recommends registering ‘affiliated solicitors’. According to the Specialized Credit Financial Business Act, credit card recruiters are exclusive to one company, but affiliated recruiters are an exception. Card companies are recommending credit card products that are suitable for customers after intensively analyzing customer data such as consumption patterns. You must be registered as an affiliate solicitor to introduce other companies’ products.
Credit card companies are known to have additionally suggested to the Financial Services Commission whether it is possible to promote non-financial business through subsidiaries in addition to signing partnership recruitment contracts in order to promote various platform businesses like fintech companies. Card companies, through the Credit Finance Association, requested financial authorities at the end of last year to ease regulations on ‘affiliation recruitment’, but it was reported that a negative response came back.
Since then, as the new government has included a regulatory ban on ‘innovative finance for financial companies’ as a national task, in August of this year, card companies have requested two tasks from the authorities to promote new businesses;
On the other hand, the Financial Services Commission is still adhering to its principles. An official from the Financial Services Commission said, “There is no specific plan related to the exceptions to the Financial Services Act.” At the same time, he explained, “For now, we are discussing the investment regulation of the Financial Industry Act.
Credit card companies are paying attention to new data businesses. In particular, I am very interested in the credit bureau (CB, Credit Bureau) using card payment big data. Currently, credit card companies are running the CB business through the Financial Services Commission’s innovative financial service (financial regulatory sandbox) because they cannot double as credit inquiry businesses. With the Financial Services Commission easing restrictions on investment in subsidiaries, card companies are expected to start their CB businesses in earnest. In addition, credit card companies are expected to bypass the ‘comprehensive payment and settlement business (hereinafter referred to as the end business)’, which has been a long-cherished business, according to the policy of revitalizing the ‘financial platform business’ by the financial authorities.
An official from a card company said, “The credit card industry is facing a crisis due to rising funding rates and lowering payment fees.” It is expected to be possible,” he said.
However, among experts, in order for a credit card company to engage in financial business for non-financial subsidiaries and various subsidiaries, it is necessary to go beyond the investment regulation stage and separately devise a method of differentiating payment technology so that it can enter a new business sector comparable to large big tech companies. analysis emerges.
Kim Sang-bong, a professor of financial economics at Hansung University, said, “Just as industrial capital (non-financial companies) is transferred to financial capital (financial companies), we need to devise a way for financial company capital to be transferred to industrial capital.” Naver Pay used non-financial data such as payment and shopping history as well as the Alternative Credit Scoring System (ACSS) using machine learning and big data processing technology.” did.
There are also opinions that it is difficult for card companies to be free from the scope of regulation at a time when Naver and Kakao are also subject to regulations. Han Chang-hee, a professor of financial consumer protection law at Kookmin University, said, “Credit card companies have regulations such as the credit limit for the same person, so excessive financial support for a specific company is prohibited.” However, in fact, even conservative authorities will find it difficult to change right away.” I think it needs to be changed to fit the purpose,” he advised.
Meanwhile, the financial authorities reported the ‘improvement direction of the separation of banking and commerce’ to the 4th Financial Regulatory Innovation Conference. The plan is to limit investment in subsidiaries by financial companies and to focus on improving subsidiary operations of financial companies. In particular, in order to support the establishment of a ‘living-friendly financial platform’ for credit card companies, it is a policy to expand the scope of incidental business that female warriors can engage in without reporting (mail order sales business + mail order brokerage business, etc.). As in the case of female warriors with other business rights (requiring consent for personal information only), we plan to promote measures to allow corporate and corporate information to be used without the consent of the information subject.
Previously, in July, the Bank, Insurance, and Credit Specialized Financial Business Act was reviewed as a policy promotion plan for digital financial innovation. In addition to the separation of banking and commerce, the Financial Services Commission is also discussing ways to improve the business consignment system. It is a policy to collect opinions from various stakeholders other than those in the financial industry. Early next year, specific plans will be presented and deliberated at the Financial Regulatory Innovation Conference.
The restart of the revision work by the Financial Services Commission is interpreted as pointing out that traditional financial companies have been blocked from achieving financial innovation through digitalization due to various regulations. In the meantime, Naver and Kakao, which are regarded as large big tech companies, have entered the financial service field one after another, but traditional financial companies such as credit card companies have been restricted by regulations, making it difficult to enter new businesses. Financial companies can enter non-financial businesses that are not allowed under the current law if they are designated as ‘innovative financial services’ by the Financial Services Commission, but there have been limitations such as being unable to conduct business after the regulatory grace period of up to four years.
According to the current Act on Structural Improvement of the Financial Industry (Financial Industry Act), in the case of banks, the limit on investment in other companies (15%) is stipulated in Article 37, Paragraph 1 of the Banking Act. However, Paragraph 2 stipulates that it is possible to own more than 15% of the shares in the case of investing in the industry ‘as determined by the FSC’. Through the Banking Supervision Regulation (Article 49), the FSC allows only 15 industries that are ‘relevant’ to banks’ business. However, KB Kookmin Bank’s affordable phone business ‘LiveM’ and Shinhan Bank’s delivery app service ‘Danger’ are exceptionally allowed through the designation of innovative financial services by the financial authorities.
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Reporter Moon Hye-won
I am in charge of small business and finance. I will ask shamelessly and write humbly.