FSC welcomes Alibaba’s Koreapay

The Financial Services Commission welcomed Alibaba Group Chairman Jack Ma’s plan to launch “Koreapay,” a local version of its payment gateway Alipay, on Wednesday, as the financial regulator gears up to support the emerging fintech business.

During a press conference to discuss the regulator’s current progress on boosting the fintech - or financial technology - industry as a new growth engine for Korea, Doh Kyu-sang, director general of the financial services bureau at the FSC, mentioned that the regulator will encourage the launch of new payment gateway services by both financial and nonfinancial companies.

He added that the entrance of overseas players into the Korean market will also be welcomed.

“To launch the service, foreign entities should register their business with the Korean authorities if they want to start the service for Koreans,” Doh said. “It is not a complex regulation, but just a procedure.”

Alipay, which is currently used in Korea by Chinese tourists, has not been registered as a payment gateway service here yet.

Ma said on Tuesday during his visit to Seoul that his company will search for a Korean partner to localize and develop Alipay. Since it was the first time Ma showed an intention to expand the service outside of China, his remark came as a surprise.

Koreapay, if established, will allow Korean consumers to make payments through the Internet-based service both at home and abroad.

The expansion of the Chinese e-commerce giant into the Korean market is expected to add to the Korean government’s efforts to foster the emerging fintech industry.

Since his inauguration in March, FSC Chairman Yim Jong-yong has been emphasizing the need to lift regulatory barriers in order to allow nonfinancial companies such as IT and e-commerce businesses to play in the financial market.

According to Doh, the fintech industry is forecasted to generate about 72 trillion won ($65.7 billion) in profit in the next 10 years, if the government actively promotes the business.

The FSC has designated six emergent fintech areas - payment gateway services, remittance, direct banking, crowdfunding, asset management and insurance - as main areas to focus on and remove unnecessary regulations.

As for the payment gateway service, the authority is planning to use Alipay and PayPal as a benchmark to launch its own systems.

Since last year, the financial regulator has made progress in this by eliminating the mandatory use of an electronic personal identification verification certificate and Active-X in order to help payment gateway companies introduce simpler platforms.

Seven out of eight local credit card companies have developed such services that do not require the strict identification process.

For remittance, the commission is preparing to allow nonfinancial businesses to establish their own platforms to transfer money, including foreign currencies, without having to pass through financial institutions.

The Ministry of Strategy and Finance is currently working to revise the law related to foreign currency transfers, according to the FSC official. The transfer of foreign currencies has been strictly restricted to financial institutions due to possible risks of illegal arbitrage.

Facebook allows its users to send money to acquaintances whose information is stored on their smartphones through U.S. fintech company Venmo’s payment service.

“The Finance Ministry and FSC are in talks to expand eligible parties for foreign currency transfer,” Doh said.

Crowdfunding will be legalized in Korea as soon as a pending bill is passed by the National Assembly in June, allowing businesses to attract investment online, the FSC official also mentioned.

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]