The Financial Services Commission will significantly tighten regulations on payment gateway (PG) operators to prevent a recurrence of the unsettled payment incident involving Tmon and WEMAKEPRICE INC. (T-MEP). Settlement funds that PG operators temporarily hold for seller payouts or consumer refunds will be managed entirely by external institutions in stages, and capital requirements will be raised based on transaction size.
The Financial Services Commission on the 19th gave advance notice of legislation and regulatory changes for the Enforcement Decree of the Electronic Financial Transactions Act and revisions to the Electronic Financial Supervision Regulations, which detail the amended Electronic Financial Transactions Act. The amended Electronic Financial Transactions Act mandates that settlement funds held by PG operators be managed externally to prevent a recurrence of the T-MEP unsettled payment incident and strengthens the supervisory framework to promote sound management by electronic financial business operators.
The Financial Services Commission required PG operators to manage seller settlement funds externally through trust, deposit, or payment guarantee insurance. The external management ratio will be expanded in stages after the law takes effect: 60% in the first year, 80% in the second year, and 100% from the third year.
Settlement funds will be managed by banks and postal agencies in the case of deposits, by trustees in the case of trusts, and by guarantee insurers in the case of payment guarantee insurance. When operating trust funds or funds subscribed to payment guarantee insurance, investments will be limited to safe assets such as Government Bonds, local government bonds, guaranteed securities, and special bonds. In addition, in contingencies such as a PG operator's bankruptcy, a refund procedure has been established to allow the settlement fund management institution to prioritize payments to sellers and others after going through procedures to calculate payable amounts and verify the claim holders.
Capital requirements for large PG operators will also be strengthened. The Financial Services Commission raised the minimum capital for PG operators whose quarterly electronic financial transaction aggregates exceed 30 billion won from the current 1 billion won to 2 billion won.
New approval and registration procedures were established for changes in the largest shareholder of an electronic financial business operator. The Financial Services Commission prepared a new application form and attachments, and the screening period and supplementation requests will follow the existing approval and registration procedures for electronic financial business operators. Disclosure obligations for electronic financial business operators will also be expanded. Operators must disclose quarterly their compliance status with management guidance standards, the status of separate management of prepaid balances and external management of settlement funds, and settlement cycles. Payment fees must be disclosed semiannually in consideration of accounting verification burdens. However, for operators with an average monthly payment volume of less than 200 billion won, the obligation to disclose payment fees will be deferred for one year.
Operators with annual electronic financial transaction aggregates of at least 2 trillion won, or with electronic financial business revenue of at least 100 billion won and total assets of at least 500 billion won, will be subject to strengthened disclosure obligations, including management policies and risk management status.
The Financial Services Commission also prepared detailed standards to allow step-by-step sanctions—requests for measures, corrective orders, business suspension, and revocation of approval or registration—against operators that violate management guidance standards. If business suspension orders are received three or more times within five years for the same reason, approval or registration may be revoked.
The proposed revisions to the Enforcement Decree and supervisory regulations will undergo advance notice of legislation and regulatory change until Jul. 29. They are then scheduled to take effect on Dec. 17, the law's enforcement date, after deliberation by the Regulatory Rationalization Committee, review by the Ministry of Government Legislation, and resolutions by the Vice Minister meeting and the Cabinet meeting.