South Korea is slated to unveil policy packages to promote fair competition between traditional financial giants and emerging tech players as the pandemic accelerates the digital transformation in the local finance industry, a senior official said Wednesday.

Responding to the rise of tech giants in the sector, the Financial Services Commission will construct a legal framework to supervise those firms’ presence in the finance market and ease regulatory imbalances between conventional financial institutions and new players, Lee Hyoung-Joo, director general of the FSC’s financial innovation bureau, said during his lecture at The Korea Herald Finance Forum held Wednesday at The Shilla Seoul. He said the framework would be ready either this year or early next year.

Lee also noted that the financial regulator plans to take steps to obligate tech firms operating electronic payment services, to deposit customers’ prepaid money to local lenders to protect their assets traded in the e-commerce market. 

According to data from the market watchdog Financial Supervisory Service, the prepaid money secured by operators of online financial services, including mobile payment solution KakaoPay, totaled 2 trillion won ($1.7 billion) as of this year, but there has not been government regulations regarding proper management of those funds. 

“Along with measures to apply the same regulations to both traditional financial companies and their big tech rivals for a fair market environment, the authorities will ramp up efforts to protect financial consumers from digital security problems,” Lee said. “Consumer protection should be placed at the center of financial innovation.”

Meanwhile, the local fintech industry came into the limelight, boosting the digital transition in the finance circles. 

“Among the top 500 financial entities, including global banks and fintech firms, the proportion of the latter increased by 30 percent as of October, according to data from the Economist, which shows the world has stepped closer to the era of digital finance,” he said. 

In response to the digital transition in the finance sector, the FSC will ramp up efforts to nurture data-driven financial services such as MyData, a business model that offers integrated management of personal credit information such as banking transactions or credit card records and makes personalized product recommendations to customers, he added.

By Choi Jae-hee (cjh@heraldcorp.com)