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 face grilling over high financial commissions charged to sellers
From left are Kakao founder Kim Beom-su and Naver founder Lee Hae-jin. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Financial authorities are hitting the financial arms of Naver and Kakao ― two of the nation's largest online platform operators ― on the commission fees they've been charging to the self-employed, deemed “excessive.”
Korean financial regulators are cracking down on the country's top two big tech companies, with the Korean lawmakers criticizing them as “symbols of greed.”
As Kakao and Naver shares have lost billions of dollars due to foreign and institutional investors' dumping of their stocks, from Kakao and Naver's standpoint, reaching a compromise with the regulators is the best possible option, say financial regulation officials. Kakao is on track to abandon some of its services as a gesture to acknowledge the authorities' moves to correct the abusive effects of their market dominance via their online platforms.
Unsurprisingly, lawmakers have asked Naver Pay and KakaoPay to cut their commission to a level similar to that of conventional credit card companies here.
This situation reflects the widening controversy on whether existing laws provide a level playing field between big tech firms and conventional financial firms. With big tech firms expanding their businesses into the financial sector, critics and liberal ruling party lawmakers argue that there is an urgent need to revise financial legislation such that Naver and Kakao will be subject to the same regulations existing financial firms face.
Under the Specialized Credit Finance Business Act, credit card companies have to recalculate the level of commission fees charged to their affiliated stores every three years after negotiations with financial watchdogs. But big tech firms are not required to make this recalculation, which the card industry calls unfair at a time when the financial influence of big tech firms is growing and their commission is set at a relatively higher level than that of conventional card firms.
According to data released by Rep. Kim Han-jeong of the ruling Democratic Party of Korea (DPK), Naver Pay charges a commission fee of 2.2 percent to the self-employed, whose annual sales are below 300 million won ($250,000). Kakao Pay also charges a 2-percent range fee as for commission on them. This fee is more than twice the 0.8 percent charged by conventional credit card companies to self-employed sellers.
Seen above is a credit card or bank account registration page for Naver Pay's secure payment system. Screenshot from Naver Pay
Financial regulators are set to unveil a revised card commission policy sometime in November, and a central point should be whether the upcoming new policy carries any specifics on measures to guarantee fair competition between big tech firms and conventional credit card companies.
Financial Services Commission Chairman Koh Seung-beom also voiced the need to establish a fair regulatory environment, saying that big tech firms and existing financial firms should operate their financial business under the same regulations.
“Under the current legal system, big tech firms are less regulated by watchdogs than other financial firms, even if the former has a similar revenue structure when operating financial businesses,” an industry source said.