Korean Regulator Will Require Banks to Open Up Their Payment Systems to Third-Party Fintechs

South Korea has become the latest international market attempting to usher in the era of open banking. The nation’s Fnancial Service Commission is introducing new rules that will force banks to open their payment systems to third party fintech challengers, in a bid to increase competition and promote innovation. The FSC’s plan foresees established banks opening up their payment networks to all fitech payment service providers as well as other banks. As a first step, this means customers will be able to access an aggregated view of their accounts and make payments via a signle app. The fees fintech firms pay to use the system will be lowered to one tenth of the current level to ensure fair competition. Additionally, the country’s Electronic Financial Transaction Act will be amended to require banks to offer payment service providers with standardised APIs for money transfer. It will also prohibit banks from any discriminatory action against payment service providers using their payment system in processing money transfer and charging fees. In the medium to long term, the FSC says it will consider allowing qualified fintech payment service providers direct access to the payment system without relying on banks’ services. The FSC also plans to overhaul the current regulatory framework on electronic financial business to promote innovation and competition in financial payment services.