The banking sector requested that the People Power Party improve regulations prohibiting ‘Gong Yoo’ sharing of customer information between affiliates. Major domestic financial holding companies are pushing for the enhancement of a ‘super app’ created to provide customized services by consolidating affiliate applications, such as banks, but business expansion is challenging due to restrictions on the use of customer information for ‘sales purposes.’
According to the National Assembly and the financial sector on the 14th, the Korea Banking Association suggested improving regulations on information sharing between financial holding company affiliates during a ‘People Power Party-bank president field meeting’ held on the 9th. Attendees included lawmakers from the National Assembly’s Political Affairs Committee, Korea Banking Association Chairman Jo Yong-bung, Presidents of major banks including KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, and the Jeonbuk Bank president, as well as the CEO of Toss Bank.
The Korea Banking Association noted, 'It is difficult to enhance synergy across industries, and the benefits to consumers are diminished,' demanding the lifting of restrictions on customer information sharing for sales purposes. Due to a 2014 amendment to the Financial Holding Company Act, sharing customer information for sales purposes between affiliates is not allowed. This is because sharing of customer information between affiliates was limited to ‘internal management purposes’ following the large-scale customer information leak incident at credit card companies in 2013.
Consequently, financial holding companies are experiencing challenges in providing customized ‘hyper-personalized’ services. The super apps that financial holding companies aim to develop utilize customer information secured from affiliates such as banks, insurance, securities, and cards to offer tailored products to individuals. For example, customers who frequently make card payments at hospitals or pharmacies could be recommended health insurance, while those who keep substantial amounts in demand deposit accounts could be suggested financial investment products. Currently, all five major financial holding companies are competing in the super app market. As of the end of last year, the monthly active users (MAU) of the KB Financial Group app stood at 31.03 million, leading the market.
The Korea Banking Association proposed amending the Financial Holding Company Act to adopt an ‘opt-out’ system, which has been implemented in the U.S., Japan, and other countries. The opt-out system fundamentally allows the sharing of customer information for sales purposes but excludes customers who express a desire to opt-out.
If implementing the opt-out system is difficult, they have asked for clarification on which businesses fall under the currently permitted internal management purposes. Until now, it was unclear whether using customer information from affiliate card companies for enhancing credit scoring models or sharing and combining customer information between affiliates to create customer segmentation algorithms could be considered valid for management purposes, making business execution challenging.
Financial authorities are in a position where it is difficult to allow the sharing of customer information for sales purposes. This is due to an increasing trend in the tightening of personal information protection regulations, as well as ongoing controversies regarding personal information leaks. Kakao Pay has recently faced penalties from the Personal Information Protection Commission for providing customer information to Apple and Alipay without consent. A Financial Services Commission official stated, 'Given the high risk of incidents such as personal information leaks, it is not easy to loosen all regulations,' and added, 'Amending the Financial Holding Company Act is difficult, but we plan to clarify the scope of internal management purposes requested by the banking sector through authoritative interpretation.'