FSS fines Kakao Pay $10 mil. for illegally transferring customer data to Alipay

Financial Supervisory Service head Lee Bok-hyun speaks during a seminar at the Korea Financial Investment Association building in Seoul, Tuesday. Yonhap

The Financial Supervisory Service (FSS) has imposed a 15 billion won ($10 million) fine on Kakao Pay, the settlement and payment subsidiary of Kakao Corp., for handing over some 40 million users' data to its second-largest shareholder, Alipay Singapore Holdings, without user consent, the financial watchdog said Wednesday.

The final amount of the fine will be determined by the Financial Services Commission (FSC). If the FSC upholds the FSS recommendation, the figure will be the heaviest fine to date.

In January, the Personal Information Protection Commission imposed a fine of 5.9 billion won on the Kakao subsidiary. The commission’s fine factored in Kakao Pay’s business revenue.

However, the FSS can raise the amount up to 3 percent of its revenue total, as long as it complies with the relevant law governing credit information.

Kakao Pay CEO Shin Won-keun speaks during a press conference in Seoul, in this May 15, 2023 file photo. Yonhap

The issue was whether the Kakao subsidiary needed user consent before the transfer and whether encrypted data handlers ensured that users were guaranteed easy access to their data at any time.

The relevant law requires user consent before collecting their data or providing it to a third party. Consent was needed since Alipay is an overseas entity.

The FSS said the data were acquired by Alipay, a conclusion drawn from an inspection of the Kakao subsidiary over foreign exchange trading.

The Kakao subsidiary maintains the data was handed over to provide Apple App Store payment services to Kakao Pay users.

The company said in a statement that it “had no comment on an ongoing matter.”

Tech giant Toss, operated by Viva Republica, was slapped with a 6 billion won fine last year. Toss used over 29 million records without user consent between November 2021 and April 2022, the FSS said.