Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
$870 mil. in liquidity support to be given to sellers hit by TMON, WeMakePrice crisis
A victim of payment delays from TMON and WeMakePrice demonstrates in front of the Financial Supervisory Service headquarters in Seoul, Tuesday, calling for prompt refunds. Yonhap
By Lee Yeon-woo
Regulations on e-commerce companies and payment gateway providers to be tightened
The government will provide 1.2 trillion won ($870 million) in liquidity support to aid sellers affected by the TMON and WeMakePrice crisis, while also ensuring that full refunds for general products will be completed within this week.
To prevent further incidents, the settlement period for e-commerce companies and payment gateway providers will be set to less than 40 days. A payment gateway refers to a settlement agent service that reads payment cards and sends information to e-commerce sites and online retailers.
These measures were announced by the government on Wednesday during a meeting chaired by Finance Minister Choi Sang-mok. The discussion focused on additional support for affected customers and sellers, as well as improvements to the system.
As of Aug. 1, the total unsettled payments for the two Korean affiliates of Singapore-based e-commerce platform Qoo10 amounted to 278.3 billion won. Consumer losses related to general products, travel products and gift certificates are estimated at 59.4 billion won. With the number of claims continuing to rise, the overall losses are expected to increase further.
Read More
Refunds for customers who purchased general products will be completed within this week. For travel products and gift certificates, which involve disputes over rights between travel agencies, credit card companies and payment gateway providers, the government will pursue consumer relief by engaging in dispute mediation with the Korea Consumer Agency.
The central and local governments have joined hands to support sellers, providing over 1.2 trillion won of liquidity. Starting Wednesday, the government will also extend the maturity of existing loans and guarantees for affected companies by up to one year. Employment retention subsidies and livelihood loans will be provided to minimize employment instability.
Deputy Prime Minister and Finance Minister Choi Sang-mok announces measures to support sellers and consumers affected by TMON and WeMakePrice's payment delays at the Government Complex in Seoul, Wednesday. Yonhap
Stricter regulations on e-commerce payment systems
Until now, e-commerce companies and payment gateway providers have set settlement periods and managed sales proceeds independently based on their own terms and contracts, without specific legal regulations.
In general, the payment process is segmented into several stages: consumer, credit card company, primary payment gateway provider, secondary payment gateway provider (online platform in this case) and vendor. If any one of these stages encounters a payment default, it can trigger a chain reaction, transferring risk throughout the entire system, according to the Financial Supervisory Service.
In response, the government plans to amend relevant laws to mandate settlement periods. The new regulations are expected to enforce shorter periods than the current 40-60 days stipulated for large-scale retailers. Corrective orders and fines will be imposed in case of violations. The specific details will be finalized after consulting with industry stakeholders and experts.
Additionally, the government plans to require that e-commerce companies and payment gateway providers manage a certain percentage of sales money through methods such as deposits, trusts or payment guarantee insurance.
"The government has determined that preventing the adverse effects of e-commerce insolvencies from impacting sellers and consumers is of utmost importance. We thereby aimed to implement the strongest and most direct regulations possible to govern e-commerce practices," an official from the finance ministry said.