Name
Global FinTech Guide
Country _ Name
Korea, Republic of
SectionTitle
Payment services
Body
FinTechs belonging to this category offer alternative payment services which are supposed to provide a faster and cheaper way for national, European, and international payments for private and business customers by using new technologies.

For example, payment service providers hereby offer solutions to easily integrate several payment services in online shops.

Some FinTechs furthermore provide real cash register systems and online-reservation solutions for restaurants and shops providing their own payment services or making use of the payment services of FinTechs described above.

Introduction

Attitude of the country towards modern payment services

As mail-order sales and e-commerce have become increasingly widespread with the development of information and communication technology, the digital payment services market (electronic prepayment means, payment gateways, etc.) is also growing continuously. The growth of this market has been accelerating even more since the outbreak of the COVID-19 pandemic).

However, recent incidents involving electronic payment instruments, such as the Merge Point case, have raised serious concerns regarding the scope of electronic prepayment means and the protection of prepaid funds, prompting the authorities to strengthen relevant regulations. In addition, the TMON and WeMakePrice incidents, which exposed risks in fund management by payment gateway service providers, have drawn increased public scrutiny and political attention to the sector.

In response, financial regulators have begun to shift regulatory direction toward enhancing user protection and ensuring the soundness of the digital payment services industry. As discussed in Section iii below, the authorities are actively pursuing legislative and administrative measures, including amendments to the Electronic Financial Transactions Act, to reinforce the regulatory framework governing this space.


Legal affairs

Obligations and requirements to provide payment services or ancillary services described above

In Korea, the EFTA regulates digital payment services under the umbrella term of 'electronic financial services.' The following services are categorized as electronic financial services under the EFTA: issuance and management of electronic money, electronic fund transfer, issuance and management of electronic debit payment means; the issuance and management of electronic prepayment means, payment gateways ('PG'), escrow services, electronic bill payment and presentment ('EBPP'). Those engaged in the business of providing the above electronic financial services must be licensed by the financial regulators (for the issuance and management of electronic money) or registered (in the case of all other electronic financial services).
To register as electronic financial service providers in order to provide electronic prepayment means and PG services, which are especially relevant to FinTech, one must qualify as a company or other qualified entity under the Commercial Act of Korea and meet the minimum capital requirements (KRW 2 billion, or approximately USD 1,467,906, for electronic prepayment means service providers; KRW 1 billion, or approximately USD 733,953, for PGs), personnel requirements, IT equipment requirements, financial soundness requirements, as well as certain requirements applicable to major investors in the relevant financial service provider.

Additional comments regarding the legal situation for payment services or what FinTech’s must be aware of in this business area

The amendment to the Electronic Financial Transactions Act (EFTA), which took effect on September 15, 2024, introduced several key reforms aimed at addressing regulatory blind spots in the electronic prepayment means sector and enhancing user protection.
First, the definition of electronic prepayment means was revised to expand the regulatory scope of businesses subject to supervision. Previously, such instruments were only regulated if they were usable across two or more industries. Under the amended definition, however, even instruments usable within a single industry are now covered, so long as they serve a payment function. Moreover, instruments used exclusively within corporate groups (e.g., between parent and subsidiary companies) are also now regarded as electronic prepayment means. In line with this expansion, grounds for exemption from registration as a prepayment means issuer have been narrowed, making it more difficult for issuers to avoid registration requirements.

In addition, new compliance obligations have been imposed to strengthen user protection. These include a requirement that prepaid funds must be fully segregated and managed in a form prescribed by law (i.e., via trust accounts or insurance policies), thereby reinforcing the safety of customer funds.

With respect to payment gateway (PG) services, the amended EFTA also includes ongoing discussions around clarifying the definition of PG services, and strengthening regulatory obligations regarding settlement fund protection and user safeguards.
In light of these regulatory changes, FinTech companies operating in the payment services space—particularly those involved in issuance of prepayment means or PG services—must proactively review their business models and internal compliance systems to ensure full alignment with the new legal framework.


Economic conditions

Market size for payment services and biggest payment service providers
According to information published by the Bank of Korea, as 2024, the average daily amount for transactions through PG services was about KRW 1.37 trillion, and the number of transactions reached approximately 29,360,000. The average daily transaction amount for electronic prepayment services was approximately KRW 1.17 trillion, with around 33.17 million transactions. KG INICIS, Toss Payments, NHN Korea Cyber Payment, and NICEPAY are the largest players in the PG market. Together, they make up over 60 per cent of the market share. The electronic prepayment services market is dominated by KakaoPay, which holds about KRW 583.5 billion worth of customers' prepaid funds as of 2024.

Additional comments regarding the economic situation for payment services or what FinTech’s must be aware of in this business area

In Korea, simple, mobile payment services, which store data on payment methods on mobile devices and allow users to make payments using simple authentication such as password and pattern input, have become massively popular. Generally, it is understood that registration as an electronic financial service provider is required for such service provider to provide the mobile payment services, but the specific type of registration required varies depending on the business model. As of 2024, the daily average transaction amount using mobile payment services exceeded KRW 959.4 billion, and over 30.72 million transactions were made. NaverPay and KakaoPay, Korea's top mobile payment services, have about 30 million users each.



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