Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Naver, Kakao on verge of suspending more financial services
From left are Naver founder Lee Hae-jin and Kakao founder Kim Beom-su. Yonhap
By Lee Min-hyung
Shares of big tech firms fail to bounce back
By Lee Min-hyung
Naver and Kakao, two of the nation's largest big tech firms, are facing temporary shutdowns of some of their financial services unless they revise their operations to meet requirements under a set of newly-introduced regulations.
The Financial Services Commission (FSC), the country's top financial policy regulator, said Thursday the companies should either reform their current services in line with the newly introduced Financial Consumer Protection Act, or seek licenses to operate their brokerage businesses.
“Any company that could violate the new act can choose to revise their services or apply for a relevant license and they can pick either of the measures on their own in order to continue operating the services after the implementation of the act on Sept. 25,” a spokesman for the FSC said.
The financial authority introduced the toughened consumer protection act March 25 with a six-month grace period which expires Sept. 24. Naver Financial and Kakao Pay decided to temporarily suspend their relevant services after the watchdog took issue with the two firms' units that compared funds or insurance products.
It remains unclear when they will be able to resume the services, as both Naver and Kakao are still busy revising the services while negotiating with the watchdog. It is unlikely that they will be able to finalize the revision by the end of the grace period.
“In general, it takes about two months for a financial firm to win a license to operate a loan brokerage service, but it is not that time consuming for insurance, fund or card brokerage services,” the FSC spokesman said. “But companies have the autonomy in their choice of whether to get a license or revamp their services, and the FSC does not intervene if they abide by the new act.”
Financial Services Commission Chairman Koh Seung-beom speaks during a conference with leaders of the nation's financial associations at the headquarters of the Korea Federation of Banks in Seoul, Sep. 16. Joint Press Corps- Yonhap
An official from Kakao Pay said it would decide on the timing of reopening the now-suspended services after wrapping up a legal review.
Kakao Pay already suspended a series of insurance services, such as travel and pet insurance, due to fears of possibly violating the act. The company will also stop providing car insurance comparison services Friday.
“We will decide on when to resume the suspended services after thorough legal reviews in line with the watchdog's guidelines,” a Kakao Pay spokesperson said.
Kakao Pay Securities, a brokerage subsidiary of Kakao Pay, recently took steps to clearly explain to customers that it was engaged in the sale of funds and brokerage services.
Naver Financial, the financial arm of the nation's dominant internet portal operator, also planned to launch an insurance comparison service. But the plan has hit a snag.
Despite the pledges to operate within legal boundaries, the companies' stock prices are showing no signs of bouncing back. Starting early this month when the controversy erupted, their shares have suffered double-digit declines due to weakened investor confidence over the intensifying regulatory pressure from the government and watchdog.
Lawmakers are widely expected to find fault with the market dominance of their platforms during the annual National Assembly audit in October and the regulatory controversy is not expected to help boost their stock prices in the next several weeks.
Industry sources argued that other financial firms will probably tone down their marketing activities due to fears that they may also fall victim to potential violations of the new regulations.
“Existing financial firms as well as fintech startups will keep a low profile in their marketing activities on concerns that they may become the target of watchdogs after the act takes effect,” an official at a financial firm said.