Korean banks ordered to open payment system
(27 February 2019 – South Korea) In a move designed to increase competition and promote innovation, South Korea’s banks will be forced to open their payment systems to third party fintech firms due to new regulation introduced by the Financial Service Commission.
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, and has had relatively high fees.
Under the FSC’s new rules, the nation’s banks must open their payment network to all fintech payment service providers as well as other banks. Fees charged on fintech firms for using the network will be lowered to one tenth of the current level to ensure fair competition.
Amendments to the country’s Electronic Financial Transaction Act will also mandate all banks to offer payment service providers with standardised APIs for money transfer and 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.