South Korea’s Financial Services Commission (FSC) has unveiled its work plan for 2021, outlining key areas of focus and policy tasks for the year, including promoting financial innovation by advancing open banking development and adoption, the regulator said on January 18, 2021.
To promote the development and use of contactless financial services, the FSC said it will begin allowing savings banks and credit card companies to provide open banking services in the first half of 2021, which will be followed by financial investment businesses.
Moving forward, the government said it will also work to allow more account types to be eligible to sign up for open banking and to connect open banking with other digital finance infrastructures such as government-led MyData and MyPayment. The end goal here is to allow for the development of a “one-stop platform offering analysis, advise and account transfer services all from the same place.”
There are also plans to establish the legal foundations for open banking. This will involve revisions to the Electronic Financial Transactions Act, which will specify requirements for participating institutions, the FSC said.
South Korea’s open banking system
South Korea officially launched its open banking service in December 2019. The authorities aim for the system to serve as an infrastructure open to all licensed fintech companies and banks to access the systems of other banks in South Korea.
For end-users, the system will allow them to access nearly all banking services offered by any bank through a single smartphone application, including withdrawals and transfers.
Previously, 10 commercial banks, including KB Kookmin Bank, Shinhan Bank, Woori Bank and KEB Hana Bank, joined a preliminary service that began on October 30, 2019. 16 more local banks and 31 fintech companies joined in December 2019 as part of the gradual roll out.
Throughout 2020, the FSC continued expanding the system to other participants, including selected mutual finance businesses, securities firms, as well as the Korea Post in December.
As of July 2020, there were a total of 72 service providers part of the open banking system.
The system has also gained much popularity among end-users. Over 20 million bank customers had joined the open banking service and created nearly 40 million bank accounts, as of June 2020. This means that nearly 72% of the 28.21 million economically active adults in South Korea utilized open banking.
Other fintech priorities for 2021
Besides outlining its open banking ambitions, the FSC also identified other fintech initiatives it will be focusing on in 2021.
Among other things, the regulator said it will establish “clear standards” on the use of mobile-based contactless authentication and identity verification system in financial services, including fingerprint scanning and facial recognition technologies. This will allow for smoother and more convenient digital onboarding experiences for customers.
The FSC also said it will test run a “digital sandbox program” using CreDB managed by the Korea Financial Information Services. CreDB is a personal and business credit information system that’s been providing financial data to financial companies, enterprises and academic since June 2019.
To accelerate the growth of the fintech sector, the regulator said it will strengthen its support to startups, notably on the financing front. It will also work on a draft bill to encourage financial institutions to invest more in fintech.
Other areas of focus for the year include promoting green finance and insurance innovation, the FSC said.
