Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Financial authorities scrutinize big tech's financial business
The headquarters of Naver Financial located in Seongnam, Gyeonggi Province / Newsis
By Anna J. Park
By Anna J. Park
The Financial Supervisory Service (FSS) recently issued a series of sanctions on big tech's payment subsidiaries, strengthening regulatory supervision over their financial businesses, according to officials Sunday.
Seven out of 11 sanctions were directed at Naver Financial, which operates Naver Pay. The remaining four sanctions went to Kakao Pay, as the FSS demanded them to make effective improvements on reprimanded issues.
The supervisory agency pointed out that Naver Financial lacked an adequacy check on transactions. The big tech's financial subsidiary also did not have a sufficient system to check suspected money laundering activities.
The headquarters of Kakao Pay located in Seongnam, Gyeonggi Province / Courtesy of Kakao Pay
Kakao Pay was called out for systemic policy shortages in implementing client risk assessments. The mobile payment company was also flagged for not being equipped with bylaws for anti-money laundering tasks and also lacking independence in its auditing process.
The two payment companies' fees charged on affiliated stores are also drawing criticism. Naver Pay takes 1.85 percent of payment fees and Kakao Pay takes 2.7 percent of fees from stores with annual revenues of between 1 to 3 billion ($2.7 million) won. This is a lot higher than the 1.5 percent that average card firms take as a fee from affiliated stores.
Logos of Naver Pay and Kakao Pay
As criticism mounts targeting big tech's financial businesses, Financial Services Commission (FSC) Chairman Kim Joo-hyun said at a parliamentary committee meeting last week that the government is currently mulling over how to effectively regulate their financial subsidiaries.
FSS Governor Lee Bok-hyun also said recently that the supervisory agency is closely following international organizations, such as the IMF and BIS, as they initiate regulatory moves on big tech.
“Big tech's entry into the financial sector promotes growth and competition in the financial industry, stimulating other companies' digital innovation. However, there are concerns about new types of risks stemming from big tech's unique features, such as a possibility of increasing volatility in cash flows, as well as the danger of big tech's risks transferring into its financial subsidiary,” the FSS governor said during a regulatory seminar on big techs earlier this month. “Thus, big techs are required to raise their internal control capacity and risk management so that they could earn consumer trust and bring innovation in the financial industry,” he added.