Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Starbucks under scrutiny of financial watchdog
A Starbucks store in Seoul is seen in this July file photo. Yonhap
By Park Jae-hyuk
Mergepoint fiasco sparks probes into digital cash issuers
By Park Jae-hyuk
Starbucks Coffee Korea has been included in the Financial Supervisory Service's (FSS) inspection of the financial soundness of 58 digital cash issuers that are not registered as electronic financial business operators, the financial watchdog said Thursday.
Coupang was initially thought to be included in the 58 companies as well, but the FSS said that the e-commerce firm's mobile payment unit is a registered electronic financial business operator subject to its supervision.
“We have received Coupang Pay's financial data,” said an FSS official in charge of supervising electronic financial business operators.
The latest inspection is intended to prevent the recurrence of incidents similar to a case involving Mergepoint, an electronic payment service provider that abruptly blocked customers from using their pre-paid coupons at its affiliated stores in August, triggering a fiasco similar to a bank run.
The Electronic Financial Transactions Act does not force Starbucks to be registered as an electronic financial business operator, because the digital cash issued by the coffeehouse chain can be used only at its stores.
The FSS, however, demanded that the company submit its financial data, considering the significant amount of cash customers have loaded into Starbucks' pre-paid gift cards and app.
Data from Rep. Hong Sung-kook of the ruling Democratic Party of Korea (DPK) showed that 180.1 billion won ($153 million) was loaded into the Starbucks app as of last December, while 8.3 billion won was loaded onto the Coffee Bean Korea app, 3.3 billion won into the Ediya Coffee app, 2.8 billion won into the Hollys Coffee app and 2.5 billion won into the app run by A Twosome Place.
“If they go bankrupt, pay their debts with the pre-paid cash or make risky investments with the money, the authorities cannot regulate them,” the lawmaker said.
Starbucks took out insurance to cover compensation expenses in case it loses the pre-paid money, but the FSS chose Starbucks as the only coffeehouse chain to be included in the recent inspection, in light of the amount of the pre-paid cash loaded into its app, which exceeds the amount of money loaded into large fintech apps.
According to Rep. Hong, 126.4 billion won was loaded onto Naver Financial's Naver Pay app, and 130.1 billion won was loaded onto Viva Republica's Toss app. Both firms are subject to the Electronic Financial Transactions Act.
Financial Services Commission Chairman Koh Seung-beom, right, talks with Financial Supervisory Service Governor Jeong Eun-bo, during the National Assembly audit in Seoul, Thursday. Yonhap
On a related note, FSS Governor Jeong Eun-bo said during Thursday's National Assembly audit that the range of companies subject to the law should be readjusted to close regulatory loopholes.
Financial Services Commission Chairman Koh Seung-beom shared this view, saying he wants the Electronic Financial Transactions Act to be revised as soon as possible to better protect consumers.
A day earlier, Fair Trade Commission Chairperson Joh Sung-wook also vowed that the antitrust regulator will look into how coffee shop chains and domestic companies use their pre-paid cash.
Coupang CEO Kang Han-seung is sworn in during the National Assembly audit in Seoul, Wednesday. Yonhap
Separately, Coupang was criticized for raking in a huge amount of profits from interest on the money its customers loaded onto its mobile payment system.
“The amount of pre-paid cash from Coupang users is reaching 75 billion won,” Rep. Song Jae-ho of the ruling DPK said during the National Assembly audit, Wednesday. “The users are not aware of the fact that the money generates interest. Is it right for such a large company like Coupang to take that money?”
In response, Coupang CEO Kang Han-seung said the company will closely monitor this issue to dispel worries.