South Korean police are investigating KakaoPay over the alleged unauthorised transfer of customer data to Alipay, according to a report by The Chosun.
Authorities are examining whether the digital wallet provider violated financial privacy laws by allegedly sharing the personal information of around 40 million users without their explicit consent.
The Anti-Corruption and Economic Crime Investigation Unit of the Gyeonggi Nambu Provincial Police Agency raided the company’s headquarters in Seongnam on 6 and 7 July.
The search marks an escalation of an investigation that began in March after the Financial Supervisory Service (FSS) referred the case to law enforcement.
The case has attracted significant attention within South Korea’s fintech sector as regulators increase scrutiny of cross-border data transfers and outsourcing arrangements.
Investigators suspect KakaoPay provided 54.2 billion instances of personal data relating to approximately 40 million users to the Chinese payment platform Alipay between 2018 and May 2024.
Authorities allege that Alipay used the information to calculate a non-sufficient funds (NSF) score. Apple commissioned the score to assess users’ payment capacity.
KakaoPay has maintained that the data transfer formed part of a lawful outsourcing arrangement related to Apple’s commissioned NSF scoring process.
Regulators, however, have disputed that position and previously imposed penalties on the company.
The Personal Information Protection Commission (PIPC) fined KakaoPay 5.968 billion won for the alleged privacy breach. The FSS later issued an institutional warning and imposed an additional penalty of 12.976 billion won.
KakaoPay filed an administrative lawsuit seeking to overturn the PIPC’s decision, but the Seoul Administrative Court ruled against the company in June.
The court found that users had not provided sufficiently informed consent for their personal information to be used in the calculation of a credit evaluation metric.
KakaoPay is appealing the ruling.
Featured image credit: Edited by Fintech News Hong Kong, based on image by garakta_studio via Magnific
