South Korea Regulators to Expand Open Banking Ecosystem

South Korea’s Financial Services Commission (FSC) made a press conference on January 18, 2021 where it unveiled its blueprint for 2021.According to the regulatory body, the key area to focus is to promote financial innovation through the advancement of open banking development and adoption.

Within the first half of 2021, FSC will begin to allow credit card companies and savings banks to promote the development and use of contactless financial services. This will be followed by financial investment businesses.

Other future plan according to the regulatory authority is to provide an eligibility framework that could allow more account types to sign up for open banking. With such arrangement, it will be easier to connect open banking with other digital finance infrastructures like MyPayment and government-led MyData. The main objective is to provide a “one-stop platform” that could provide all the services such as financial advice, analysis and account transfer services from the same spot.

The South Korean government through its regulatory agency is working assiduously to provide the legal foundation for open banking. This will involve revisiting of the Electronic Financial Transactions Act, to see how all the requirements can be specified for the participating institutions.

South Korea’s open banking system

The open banking system was officially launched in December, 2019.The aim of the system is to serve as an infrastructure to all licensed banks and FinTech companies as well as to interoperate with systems of other banks in South Korea.

For end-users, the system will enable users to access all banking services offered by any financial institution via a single smartphone application.

The open banking system started with 10 commercial banks, including Shinhan Bank, KB Kookmin Bank, KEB Hana Bank and Woori Bank, to offer preliminary services that began on October 30, 2019. In December 2019, 16 more banks and 31 FinTech companies became part of the scheme in line with the gradual roll-out plan. In December, 2020, FSC registered other participants that were drawn from non-banking sector to be part of the scheme. Such participants include securities firms, mutual finance businesses and the Korea Post.

As of July 2020, we had a total of 72 registered companies serving as service providers of the open banking system, says the FSC.

The system has recorded a tremendous success as over 20 million bank customers use open banking service and we have had 40 million bank accounts as at June 2020. This implies that, 72% of bank customers in South Korea utilized open banking.

FSC has also rolled-out other priorities for the year, 2021 which are as follows:

• Establishment of an advanced technology on the use of mobile-based contactless authentication and identity verification system in all financial services.
• Testing and running of a “digital sandbox program” using CreDB (personal and business credit information system) managed by the Korea Financial Information Services.
• Strengthening of its support to business startups especially those inclined to financial system operations and encouraging them to invest more on FinTech sector.

Crypto Market Analysis