SGI Seoul Guarantee is pushing to launch a payment guarantee insurance for settlement amounts held by electronic payment processing companies (PG). This is the first time an insurance product for PG settlement amounts will be launched in Korea. This follows the financial authorities' measures to create a self-regulation plan related to PG settlement amounts after the T-MEP incident.
According to a ChosunBiz report on the 23rd, SGI Seoul Guarantee is preparing to launch a product that manages part of the settlement amounts held by PG companies through payment guarantee insurance. Settlement amounts are the funds that PG companies temporarily hold before transferring them to the merchants. When consumers make an online purchase, PG companies hold the money for a minimum of 2 to 3 days or as long as more than a month, deducting fees before transferring it to the merchants.
This insurance is expected to be structured so that if a PG company is unable to settle payments to merchants due to a financial accident, SGI Seoul Guarantee will cover some of the payment. SGI Seoul Guarantee noted, "No specific schedule has been set, but we plan to begin preparations for the insurance launch as soon as the financial authorities release the relevant self-regulation plan."
Currently, the Financial Supervisory Service (FSS) is drafting a self-regulation plan that includes requirements for PG companies to safely manage settlement amounts through methods such as trusts and payment guarantee insurance to prevent a recurrence of the T-MEP incident. A bill was introduced in the National Assembly that would require all PG settlement amounts to be managed by external institutions, but it remains pending, and even if passed, there is a one-year grace period. For this reason, the FSS aims to address the regulatory gap by proactively creating a self-regulation plan. An FSS official said, "We are in discussions with the industry to develop a self-regulation plan related to PG settlement amounts."
The reason SGI Seoul Guarantee is developing such insurance products is that last year's T-MEP incident began with the failure to pay settlement amounts. TMON and WeMakePrice combined electronic commerce (e-commerce) and PG business. The two companies had been in a state of capital depletion for years, continuing operations while misappropriating the settlement amounts owed to vendors. This method extended the life of failing enterprises and caused approximately 1.3 trillion won in delayed settlements last year.