To breathe new life into fintech business, FSC relaxes many regulationsPeople will soon be able to buy relatively expensive items like plane tickets or giant TVs through mobile payment systems like Naver Pay after the maximum limit for a single purchase is lifted from 2 million won ($1,700) to 3 to 5 million won.
The ceiling will be lifted in the second half of next year.
Additionally the government will lower the entry barrier for smaller fintech start-ups by adopting a “small license” system. This will temporarily approve some financial services by small fintech companies that don’t meet current requirements, particularly capital requirements.
The Financial Services Commission (FSC) on Wednesday introduced a so-called “scale up” strategy for the fintech industry to help it grow.
The FSC focused on eight different fields including easing entry barriers, regulation reforms, establishing the foundation for digital finance as well as encouraging fintech investments. It eased regulations for initial public offerings (IPOs) for fintech companies and encouraged overseas expansion by fintech companies.
Under current law, consumers cannot make purchases above 2 million won from their mobile payment wallets. There have been growing calls to raises that limit, which was set roughly a decade ago.
The amount currently stored in digital wallets of such mobile payment services totaled 1.5 trillion won in Korea as of the first half of this year, up from 1 trillion won in 2016.
The FSC highlighted its “small license” changes.
With the small license system, entering the financial service business will be much easier.
The FSC will relax the current approval system, opening the field to smaller fintech companies that currently don’t qualify because of the size of their businesses.
One example involves regulations involving small electronic financial companies. Approvals were only given to electronic financial companies with capital of at least 500 million won. However, the government recently eased the regulation to allow companies with 300 million won in capital.
The financial authority is encouraging fintech companies to list on the Kosdaq market. Companies that are designated innovative financial services will be given higher points when being considered for listing on the junior market, especially if its services are attractive, feasible, competitive, unique and innovative.
To promote the fintech industry, the FSC will help create a fund of 300 billion won pool in the next four years that will be funded by banks and private investors. Half of the investment will be invested in fintech companies in their early stages of development while the rest will be used to fund fintech companies expanding overseas.
The FSC added that it can extend the period of funding from four years to six as well as the investment pool from 300 billion won to 500 billion won.
State-run financial institutions including the Korea Development Bank will be providing 3.35 trillion won in support including loans and guarantees.
“The government, as part of its efforts on innovative growth and financial innovation, has been pursuing the vitalization of fintech,” said Kwon Dae-young, director-general of the FSC’s financial innovation bureau.
“The FSC has been creating a system to strengthen digital financial innovation capacity through providing a regulatory sandbox, regulation improvements and [government] budget support,” he added. “But it has been seen that the fintech and related policies are not enough to fundamentally change our industries and create global unions [of start-ups].
“As such, we’re at a point where a strategic and concentrated approach in scaling up the fintech market is needed so the industry can make a huge leap based on our past efforts.”
Kwon said the government will continue to pursue regulatory reforms so innovative services can succeed, including adopting regulations that are permitted overseas but not in Korea.
According to the FSC, since adopting the financial regulatory sandbox on April 1, it has temporarily approved 68 fintech services and, as a result, more than 200 people were employed by the fintech companies.
The FSC said that since launching open banking at the end of October, roughly 2.5 million customers have subscribed to the service.
BY LEE HO-JEONG [firstname.lastname@example.org]