Financial authorities scrutinize big tech's financial business

• Published date: 26 February 2023
• Publication title: The Korea Times

The Financial Supervisory Service (FSS) recently issued a series of sanctions on big tech's payment subsidiaries, strengthening regulatory supervision over their financial businesses, according to officials Sunday.

Seven out of 11 sanctions were directed at Naver Financial, which operates Naver Pay. The remaining four sanctions went to Kakao Pay, as the FSS demanded them to make effective improvements on reprimanded issues.

The supervisory agency pointed out that Naver Financial lacked an adequacy check on transactions. The big tech's financial subsidiary also did not have a sufficient system to check suspected money laundering activities.

Kakao Pay was called out for systemic policy shortages in implementing client risk assessments. The mobile payment company was also flagged for not being equipped with bylaws for anti-money laundering tasks and also lacking independence in its auditing process.

The two payment companies' fees charged on affiliated stores are also drawing criticism. Naver Pay takes 1.85 percent of payment fees and Kakao Pay takes 2.7 percent of fees from stores with annual revenues of between 1 to 3 billion ($2.7 million) won. This is a lot higher than the 1.5 percent that average card firms take as a fee from affiliated stores.

As criticism mounts...