South Korea’s financial regulatory sandbox policy went into effect Monday, with the Financial Services Commission selecting 19 innovative fintech services for “priority review.”
The Financial Services Commission’s innovative finance review panel held its first meeting to decide on the first batch of fintech services to covered by the regulatory sandbox policy.
The envisioned services span diverse categories including loans (five), insurance (two), capital market (three), earnings and credit (three), banking (two) data (two) digital finance (one) and peer-to-peer loans (one).
A regulatory sandbox is a mechanism for the development of regulations that do not unduly slow down the pace of innovation. Regulations could be temporarily suspended for new forms of financial services while they are being tested in the market. New measures will be introduced later, once it became clear what kinds of regulations are appropriate and reasonable.
The regulatory exemption policy came into effect as part of the Special Act on Financial Innovation Support which was passed by the National Assembly in November last year and formally went into effect on Monday.
Under the special act, companies selected by the FSC to partake in the regulatory sandbox are exempt from current regulations.
To protect consumers from potential harm, participating companies are required to submit consumer protection and risk management plans, which the FSC has to approve before they can be tested.
“With a regulatory sandbox, fintech firms and financial institutions can test out innovative services and bring bold changes to the status quo. On the other hand, customers will get a chance to experience diverse new services,” said FSC Chairman Choi Jong-ku at the review panel’s inaugural meeting.
“Meanwhile, the government will be able to see how innovative financial services impact consumers and the market, and using such knowledge, draw up the right policies as needed,” he added.
|FSC Chairman Choi Jong-ku speaks during the first meeting of the regulator’s innovative finance review panel held in Seoul on Monday (Yonhap)|
Among the envisioned services to benefit from regulatory exemption are loan interest comparison platforms being developed by local startups that operate the Toss and Finda apps. Consumers would be able to check and compare loan products offered by different financial institutions on a single platform.
Peer-to-peer payment services, through which one can make credit card payments to others using a mobile platform or QR code will also be eligible for regulatory exemption.
An “on-off” style insurance product — which comes into effect at designated times, such as travel insurance — is also set to be launched following exemption from current regulations.
In the arena of new technology-based services, the FSC said it will enable a person’s data to be utilized to assess the credit score of an individual business owner. A P2P stock brokerage platform utilizing blockchain is another potential business model that will be permitted.
The FSC has received 105 proposals from 88 companies, including financial firms and fintech startups.
The new services launched under the regulatory sandbox policy can begin operations in May at the earliest, though the timing will differ for each business, an FSC official explained.
The remaining 85 proposals will be considered by the financial watchdog by June. The commission will also accept fresh applications in June, and will complete the evaluation process by the year-end.
By Sohn Ji-young (email@example.com)