South Korea’s payment gateway (PG) industry is growing rapidly each year, but about seven in 10 fintech companies are operating without registering as an electronic financial business, a survey found. While financial authorities have tightened oversight of PG operators, many businesses still take part in payment functions outside the formal system, raising concerns about regulatory blind spots.
According to the Korea Fintech Industry Association’s “2025 Fintech Industry Survey” released Tuesday, only 32% of 322 fintech companies surveyed were registered as electronic financial businesses. Another 64.3% were operating without registration, and 3.7% said they were considering registering. The association said this was the first time results from a full survey of fintech firms’ registration status had been made public.
Under the Electronic Financial Transactions Act, providers of services such as simple payments, prepaid top-ups and settlement are required to register with financial authorities. Operating without registration can be punished by up to three years in prison or a fine of up to 20 million won. Critics have said, however, that the legal definition of PG business is narrow, leaving “dual-role” PG operators — such as firms that broker online commerce and also handle settlement as a side business — in a regulatory gray area.
Industry officials also argue that registration requirements — including capital, staffing and security systems — can be a high barrier for early-stage startups. Some companies contend they should not be subject to registration because they provide technology and do not directly control the flow of funds.
Registration rates varied sharply by sector. In finance, which has traditionally performed financial functions, 59.2% were registered. In information and communications and in software/IT, the rates were 13.9% and 20.5%, respectively. The report attributed the gap to IT-based firms defining their services as “technology services” while in practice performing PG-like functions such as accepting payments or settling funds without registering as electronic financial businesses.
The report warned that as platform-based payment ecosystems expand, more businesses are becoming involved in payment and settlement while remaining outside registration requirements, increasing the risk of consumer harm.
On some online platforms, transactions can appear to be processed through the platform, but settlement is often handled by a separate PG firm or a financial institution. When payment delays or refund disputes arise, users may struggle to identify who is responsible, and relief can be delayed, the report said.
The report also found a growing number of “PG-like” firms staying outside the regulatory framework, particularly among “electronic financial support service providers” that assist financial institutions with IT systems, data processing, security and authentication, and among “third-tier PG firms.” It described third-tier PG firms as resellers or agencies that re-sell services based on contracts with second-tier PG firms.
A fintech industry official said that when businesses in the regulatory gray zone cause incidents, the fallout can spread across the entire industry. The official called for stronger rules to bring gray-zone operators into the formal system or to block unqualified firms from entering the market to improve transparency.
* This article has been translated by AI.
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