SGI Seoul Guarantee will launch a payment guarantee insurance policy within the year that targets settlement funds held by electronic payment gateway (PG) companies. With financial authorities issuing guidelines for managing PG firms' settlement funds to prevent a repeat of the TMON–WeMakePrice (T-MEP) incident, related insurance development has gone into full swing.
According to the financial sector on the 12th, SGI Seoul Guarantee has decided to roll out within this year an insurance product that manages a portion of the settlement funds held by PG firms through a payment guarantee structure.
Under the policy, if a PG firm becomes unable to settle payments to merchants due to a financial incident, SGI Seoul Guarantee will pay part of the amount on its behalf. SGI Seoul Guarantee is currently working on tasks for product launch, including drafting policy terms and calculating premiums.
SGI Seoul Guarantee said, "With the Financial Supervisory Service's guidelines on the management of PG firms' settlement funds being announced recently, we can now clarify product terms and the like," and added, "Accordingly, we plan to launch the PG settlement-fund insurance product before Jan. 1 of next year, the guideline implementation date."
The FSS recently announced guidelines requiring PG firms to safely manage settlement funds through methods such as trusts or payment guarantee insurance. Although a bill mandating that the entirety of PG firms' settlement funds be managed by external institutions was introduced in the National Assembly, it remains pending, and even if it passes, there will be a one-year grace period, so the guidelines were prepared in advance.
The crux of the guidelines is to have at least 60% of PG firms' settlement funds managed externally through trusts or payment guarantee insurance. The externally managed amount must be invested in safe assets such as government and public bonds.
This was prepared to establish protections for sellers after concerns over the safety of settlement funds grew due to the T-MEP incident last year. TMON and WeMakePrice operated both e-commerce and PG businesses. The two companies had been in a state of capital erosion for years and kept their operations going by diverting settlement funds owed to partner merchants. By propping up insolvent businesses in this way, they caused settlement delays of about 1.3 trillion won last year.