In an effort to prevent a recurrence of the settlement issues faced by TMON and WeMakePrice, South Korea's financial authorities are tightening regulations on payment gateway (PG) companies regarding the management of settlement funds. PG companies will now be required to manage the funds owed to sellers through external means such as trusts, deposits, or payment guarantee insurance. Additionally, the minimum capital requirement for larger PG companies will increase from 1 billion won to 2 billion won.
The Financial Services Commission announced these measures on June 19 as part of a legislative notice regarding amendments to the Electronic Financial Transactions Act. The public comment period for these changes will remain open until July 29.
According to the proposed amendments, PG operators will be required to manage seller settlement funds externally starting December 17, 2027. The external management ratio will gradually increase to 60% in the first year, 80% in the second year, and reach 100% by the third year. Settlement funds can be managed through bank deposits, postal savings, trusts, or payment guarantee insurance, with a focus on safe assets such as government bonds and municipal bonds.
The capital requirements for large PG operators will also be strengthened. PG companies with quarterly electronic financial transaction totals exceeding 30 billion won will see the minimum capital requirement raised from 1 billion won to 2 billion won. New procedures for approval and registration will be established for changes in the major shareholders of electronic financial businesses.
Disclosure obligations will also be expanded. Electronic financial businesses will be required to publicly disclose their compliance with management guidance standards, the status of separate management of prepaid funds, the status of external management of settlement funds, and settlement cycles on a quarterly basis. Payment processing fees will be disclosed biannually, although companies with average monthly payment volumes below 200 billion won will have a one-year exemption from this requirement.
The financial authorities have also established criteria for sanctions against companies that repeatedly fail to comply with management guidance standards. If a company receives three or more business suspension orders for the same reason within five years, its license or registration may be revoked.
* This article has been translated by AI.
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