Tensions between the nation’s financial regulator and its central bank are escalating. The two institutions are at odds over which one should hold supervisory authority in the area of online payment settlements, which are emerging as key financial transactions in this era of the digital economy.
Payment settlement is the process through which a merchant receives the money that customers have paid for a particular product or service.
Responding to increased demand for online payment settlements, the FSC proposed a bill in July to revise the Electronic Financial Transactions Act. It would allow mobile platforms, including online giant Naver and messenger app operator Kakao, to offer comprehensive payment and settlement services.
What drew backlash from the Bank of Korea was a clause in the legislation obliging the big tech firms to submit consumer data on electronic transactions to the Korea Financial Telecommunications & Clearings Institute.
The Bank of Korea has voiced concern over the proposed bill, saying a bigger role for the KFTC in monitoring consumer data could undermine the central bank’s authority to control the nation’s payment settlements. The KFTC is a public enterprise, not a public office, but is under the supervision of the FSC.
“The revised bill will allow the FSC to collect private consumer data on financial transactions made at big tech companies, such as Naver, through the KFTC -- a nonprofit organization monitoring several bank-to-bank payment systems,” the BOK said in a statement Wednesday.
“The BOK, as the central bank responsible for managing payment and settlement systems, is against the payment settlement system being used to oversee private transaction data, like Big Brother did. The bill, if passed, would be the only Big Brother law in the world.”
Comparing the FSC to Big Brother from George Orwell’s book “1984,” which envisioned a future world in which the government kept people under strict surveillance, the BOK stressed that the central bank’s monetary policy board has a unique role in managing payment settlement systems in accordance with the Bank of Korea Act, adding that the envisioned law would curtail the BOK’s authority over payment settlement systems, creating redundant regulations.
The apparent conflict between the two financial entities intensified after the bill was submitted to the National Assembly in November last year by Rep. Youn Kwan-suk of the ruling Democratic Party of Korea, who chairs the parliamentary National Policy Committee.
However, FSC Chairman Eun Sung-soo strongly condemned the BOK’s Big Brother remarks Friday, saying the bill would strengthen consumer protection amid the fast rise of e-commerce transactions.
“I am a little offended by the BOK denouncing the FSC’s proposed revision to the Electronic Transactions Act as the ‘Big Brother’ law. Currently, all the electronic transaction records go through the KFTC. Does this mean the KFTC and the BOK in charge of supervising the agency are Big Brothers?
“The collection of digital payment records aims to make electronic transactions more transparent and to strengthen consumer protection in the market. Only when financial crimes occur will the FSC be allowed to look into related electronic transactions made at big tech companies under the envisioned revised law,” Eun said.
Meanwhile, the FSC earlier fired back at the BOK’s claim that the regulator was planning to usurp the central bank’s authority over payment settlements by saying the revision included a number of clauses that would prevent the FSC from infringing on the BOK’s right to supervise digital payment settlements in the country.
Market observers expect the passage of the legislation to be stalled in the National Assembly for a while as the heads of the FSC and BOK have failed to reach a consensus on the issue. Finance Minister and Deputy Prime Minister Hong Nam-ki and other economic policy chiefs, including BOK Gov. Lee Ju-yeol and the FSC’s Eun, attended a closed-door meeting Thursday. The meeting ended without any resolution of their differences on the matter, according to reports.
By Choi Jae-hee (firstname.lastname@example.org