CONTENTS
- 1. Electronic Financial Business | The Legal Structure Companies Should Understand
- - Electronic Financial Transactions Act
- - Regulation on Supervision of Electronic Financial Activities
- 2. Electronic Financial Business | Licensing and Operating Requirements
- - Minimum Capital by Type of Business
- 3. Electronic Financial Business | Market Trends and Key Developments
- - Growing Entry of Fintech and Big Tech Firms
- - Spread of Cloud-Based Financial Services
- - Expansion of New Businesses Based on Open Banking and MyData
- - Regulatory Sandbox and Accelerated Digital Transformation
- - Growth of ESG and Sustainable Finance
- - Advancement of AI- and Big Data-Driven Financial Services
- 4. Electronic Financial Business | Key Practical Considerations
- - Misalignment Between the Business Model and Licensing Requirements
- - Insufficient Preparation of Licensing Application Materials
- - Delays in Building IT Infrastructure and Security Systems
- 5. Electronic Financial Business | Daeryun's Support Framework
1. Electronic Financial Business | The Legal Structure Companies Should Understand
Electronic financial business is an industry that provides a range of financial services on a foundation of information and communications technology, and a broad set of players takes part in it, including fintech firms, big tech firms, and traditional financial companies.
Each company should clearly review the legal framework that applies to its own services and understand and respond to the relevant regulations accurately.
Electronic Financial Transactions Act
The Electronic Financial Transactions Act is the core statute that sets out the overall legal framework, including the definition of electronic financial business, licensing and authorization requirements, user protection, and the structure of liability.
It serves as the benchmark for determining an operator's status and duties and the scope of liability when an incident occurs.
Regulation on Supervision of Electronic Financial Activities
The Regulation on Supervision of Electronic Financial Activities is a subordinate regulation that gives concrete shape to the Electronic Financial Transactions Act, specifying the detailed standards needed for day-to-day operations, including IT infrastructure, information protection, internal control, and capital requirements.
It is an area closely tied to regulatory examinations and sanctions, and it calls for ongoing compliance management.
2. Electronic Financial Business | Licensing and Operating Requirements
Electronic financial business is divided into license-based and registration-based categories according to the nature of the business, and the minimum capital required differs by type of business.
For license-based categories, the capital must be 5 billion won or more, while some registration-based categories require capital of 2 billion won or more.
For other registration-based categories, an operator must hold capital of at least 300 million won if its quarterly electronic financial transaction volume is 3 billion won or less, and at least 500 million won if it exceeds that amount.
An operator that wishes to engage in two or more categories must meet the capital requirement for each.
Minimum Capital by Type of Business
Type of Business | Business Content | Minimum Capital |
Electronic funds transfer business | Funds transfer between accounts by payment order or direct debit | 3 billion won |
Issuance and management of debit electronic payment instruments | Intermediation of payment transfers from the buyer's account to the seller's account | 2 billion won |
Issuance and management of prepaid electronic payment instruments | Management and transfer of prepaid balances | 2 billion won |
Electronic payment settlement agency business (PG) | Transmission of payment settlement information and agency settlement of funds | 1 billion won (small-scale: 300 million won*) |
Settlement fund escrow business (Escrow) | Holding the purchase price and paying it out once receipt of goods is confirmed | 1 billion won (small-scale: 300 million won*) |
Electronic bill presentment and payment business (EBPP) | Issuance of electronic bills and settlement of payments | 500 million won (small-scale: 300 million won*) |
Electronic currency issuance business | Issuance of electronic currency, such as prepaid cards and transit cards | Separate provisions |
※ Future amendments may tighten the capital requirements for some categories (for example, PG), so ongoing monitoring is needed.
※ Relaxed standards apply to small-scale operators whose quarterly electronic financial transaction amount is 3 billion won or less.
3. Electronic Financial Business | Market Trends and Key Developments
Electronic financial business is being reshaped quickly as technology advances and the regulatory environment changes.
Operators should identify the key trends early and prepare a strategy to respond to them.
Growing Entry of Fintech and Big Tech Firms
The entry of IT-based companies into the financial industry is accelerating.
As big tech firms such as Naver, Kakao, and Toss lead the way with innovative services, both competition and cooperation with established financial companies are deepening at the same time.
As a result, the structure of the electronic financial business market is also being reshaped quickly.
Spread of Cloud-Based Financial Services
As cloud technology is adopted across financial infrastructure, the efficiency of service development and operation is improving considerably.
Faster service launches and cost savings have become possible, and the use of the cloud is expanding on the premise of sound security and regulatory compliance frameworks.
Expansion of New Businesses Based on Open Banking and MyData
New businesses centered on the use of data are expanding rapidly.
A variety of tailored financial services are being launched on the basis of open banking and MyData, and data competitiveness is becoming a core business capability.
Regulatory Sandbox and Accelerated Digital Transformation
Change is also continuing on the institutional side.
The regulatory sandbox has made it easier to test and commercialize new services.
Traditional financial companies are also actively pursuing digital transformation strategies.
Growth of ESG and Sustainable Finance
Across the financial industry, ESG management has emerged as a leading issue.
A range of initiatives is underway, including eco-friendly financial products, investment grounded in social value, and sustainability management reporting, and fintech companies are likewise expanding services that reflect ESG factors.
Advancement of AI- and Big Data-Driven Financial Services
As AI and big data technologies advance, financial services are growing more sophisticated at a rapid pace.
Data-driven services are spreading across the areas below, raising the level of both customer experience and risk management.
· Fraudulent transaction detection
· Personalized product recommendations
· Non-face-to-face consultation, among others
4. Electronic Financial Business | Key Practical Considerations
Legal risks in the electronic financial business extend beyond whether a license has been obtained, and they often arise throughout the design and operation of the business model.
The following are issues that frequently come up in practice.
Misalignment Between the Business Model and Licensing Requirements
A misalignment between the business model and licensing requirements, such as capital, personnel, and IT and security systems, operates as a primary risk.
From the service planning stage, a company should review in advance whether it falls within the relevant business category and whether it can meet the applicable requirements.
Insufficient Preparation of Licensing Application Materials
Procedures are frequently delayed because applicants fail to prepare enough of the materials required during the licensing application process.
It is important to review the scope and standards of the required documents in advance and to allow sufficient time for preparation.
Delays in Building IT Infrastructure and Security Systems
IT infrastructure and information protection systems, such as network separation, DR center construction, and ISMS certification, require considerable lead time.
If these are not built proactively in parallel with the licensing process, the overall project schedule may be affected.
5. Electronic Financial Business | Daeryun's Support Framework
Legal disputes in the electronic financial business can lead to administrative sanctions, such as corrective orders and license revocation, as well as criminal liability and damages claims, and depending on the matter these issues are often reviewed together.
For that reason, putting in place an operating framework that meets the relevant legal requirements from the licensing stage serves as an important element of overall risk management.
Preventive Measures
▷ Review of compliance with capital, personnel, and IT requirements for each business category
▷ Advice on frameworks for implementing IT infrastructure and security requirements, such as network separation, DR centers, and ISMS certification
▷ Preparation of licensing application documents and procedural support
Post-Incident Response
▷ Response to criminal investigations involving electronic financial incidents
▷ Response to damages claims from users and merchants
▷ Development of response strategies when financial authorities commence inspections or investigations
▷ Response to changes in laws and regulations, and support for the ongoing management of certifications such as ISMS
Daeryun Law Firm draws on its understanding of the regulatory environment and practical issues across the electronic financial business to provide tailored advisory frameworks suited to each company's business structure.
If you need a legal review in connection with licensing, regulatory response, or disputes relating to the electronic financial business, you may request a consultation through the firm.
