The Financial Supervisory Service will create self-regulatory measures requiring electronic payment gateway (PG) companies to manage more than 60% of their settlement payments separately with external institutions. This initiative comes as related legal amendments have been delayed since last year's T-MEP incident, aiming to establish management and supervision standards through self-regulation.
According to the financial sector on the 21st, the FSS recently shared a draft of the self-regulation requiring PG companies to separately manage more than 60% of their settlement payments with the PG industry. The self-regulation mandates that at least 60% of the total settlement payments of PG companies must be safely managed through methods such as deposit, trust, or payment guarantee insurance. If this self-regulation is implemented, banks or insurance companies will manage more than half of the PG companies' settlement payments, reducing the possibility of misappropriation.
The FSS has completed collecting opinions from the PG industry regarding the draft and is currently coordinating the contents and timing of the final regulation announcement based on this feedback. An FSS official noted, "We are conducting self-regulation and administrative guidance work," adding that "We are working on consumer and small business protection measures at a level that does not overburden the PG companies."
Settlement payments are the funds temporarily held by PG companies. When a consumer purchases and pays for any item online, this amount does not immediately go to the merchant. The PG company facilitating the payment holds the funds for at least 2 to 3 days, and in some cases, for over a month, before transferring it to the merchant after deducting fees. PG companies must transfer the payments to the merchant within the specified settlement period.
The reason the FSS established self-regulation related to settlement payments is that last year's T-MEP incident began with unpaid settlement payments. TMON and WeMakePrice operated in both e-commerce and PG sectors. The two companies had been in a state of capital erosion for years, sustaining their operations by misappropriating the settlement payments owed to merchants. There had been no system in place to separately regulate the management of settlement payments until then. Therefore, even if PG companies used settlement payments irresponsibly, as long as they utilized them legally and paid the merchants by the settlement deadline, no issues could be raised. TMON and WeMakePrice prolonged the life of failing enterprises in this manner, resulting in approximately 1.3 trillion won in delayed settlements last year.
Following the T-MEP incident, the ruling party and the Financial Services Commission began amending laws to prevent the recurrence of delayed settlement payments. Representative Kang Min-guk of the People Power Party, who serves as the secretary of the parliamentary political affairs committee, introduced a bill to amend the Electronic Financial Transactions Act that includes a provision mandating PG companies to manage all settlement payments separately with external institutions. However, the Democratic Party of Korea has insisted that amendments to the Electronic Financial Transactions Act and the establishment of the Online Platform Act must occur simultaneously, delaying the progress of the amendment for more than six months. Additionally, even if the amendment passes, there will be a one-year grace period before actual implementation.
To prevent the misappropriation of settlement payments by PG companies and additional financial incidents during the institutional vacuum period, the FSS established self-regulation. Although the self-regulation and administrative guidance do not have legal binding force, they set the standards for the FSS's supervision and inspection operations. For PG companies, this effectively creates obligations. Furthermore, considering the expenses associated with joining trusts or payment guarantee insurance, the FSS set the separate management level for settlement payments at 60%, rather than 100%, as a soft landing measure for smaller PG companies.
The PG industry is welcoming the FSS's self-regulation measures. An industry official said, "While there may be some cost burden, the priority is to restore the trustworthiness of the PG industry, which has waned after the T-MEP incident."