For the first time since the T-MEP debacle in Jul. last year (when Tmon and WEMAKEPRICE INC. failed to pay merchants the amounts they were owed), the financial authorities canceled the registrations of two electronic payment gateway (PG; Payment Gateway) firms. Since the relevant law took effect in 2007, only five PG companies had received registration cancellations, a result of the financial authorities tightening oversight of PG operators in the wake of the T-MEP incident.
According to the financial authorities on the 28th, the Financial Services Commission (FSC) recently canceled the electronic financial business registrations of PG firms NSPayments and 13Mile. PG companies provide services that transmit payment information among buyers, sellers, and financial institutions for online and offline payments and broker settlement of funds.
NSPayments and 13Mile reportedly failed to comply with the Electronic Financial Transactions Act, including by not submitting business reports to the Financial Supervisory Service (FSS). 13Mile operated an integrated payment terminal called "NextM" and received investment from Kakao Pay in 2018. NSPayments is known to be affiliated with PG company L, which is on trial over a payment delay case amounting to about 78 billion won.
It has been three years since the financial authorities last decided to cancel a PG company's registration, in Sep. 2022. Since electronic financial business registrations began in 2007, only five companies had received cancellations. Under current law, the FSC can cancel an electronic financial business registration, but the conditions are strict, such as registering with false information or receiving a penalty of a fine or heavier for violating financial laws and regulations.
After the large-scale unsettled payment crisis at T-MEP in Jul. last year, criticism arose that PG companies were in a blind spot of oversight. Financial companies can operate only after going through the financial authorities' licensing procedures, but PG firms can do business with simple registration.
Although the financial authorities check and evaluate PG companies' soundness and management status every year, the actual measures they can take are basic, such as demanding management improvement, requiring plan submissions, conducting evaluations, and concluding management improvement agreements. In response, the National Assembly and the financial authorities strengthened supervision of PG firms through legal revisions and institutional improvements.
An amendment to the Electronic Financial Transactions Act, which provides a basis for step-by-step measures such as corrective orders, business suspension, and registration cancellation if electronic financial business operators including PG operators fail to comply with management guidance standards, was promulgated on the 16th of this month. The amendment has been in effect since Dec. 17.