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FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.
Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time.
As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.
Introduction
Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services
In the past, monetary loans were regulated under the Act on Registration of Lending Business, etc. and Protection of Finance Users, which required a permanent establishment and the direct delivery of documents such as terms and conditions. Under this law, FinTech companies faced difficulties entering the lending market. However, with the enactment of the Act on Online Investment-Linked Financing and User Protection (the “P2P Financing Act”), those registered to provide P2P financing services can provide P2P loans using online platforms. Currently, the registration grace period has expired, so only registered P2P financing companies’ businesses are operating.
Legal affairs
Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above
As mentioned above, in order to offer P2P loans through online platforms, registration under the P2P Financing Act is required.
Where a company intends to engage in the business of lending money or collecting on debts under loan contracts assigned to it, including the issuance of money through discounting of notes, security transfers, etc., it must register as a lending business. The business of lending money, including the lending of money secured by accounts receivables, is specifically subject to registration. In order to register as a lending business, a company must have minimum capital of KRW 50 million, have completed education on lending, have a permanent place of business, and meet certain personnel requirements.
Additional comments regarding the legal situation for loan-giving-, factoring-, brokerage, finetrading-, and ancillary services or what FinTech’s must be aware of in this business area
As mentioned above, P2P companies must comply with the provisions of the P2P Financing Act such as the information disclosure requirement.
In addition, it should be noted that although the P2P Financing Act explicitly permits linked investments by financial institutions, it is nearly impossible for them to do so due to restrictions under other applicable laws. The financial regulators are aware of this issue and are working to improve the system.
Economic conditions
Market size for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services and biggest companies in this business area
According to KTB Investment & Securities, the size of the accounts receivable factoring market is estimated to be around KRW 249 trillion, and the P2P lending market is steadily expanding as mentioned in Section 1.e. above.
Additional comments regarding the economic situation for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services or what FinTech’s must be aware of in this business area
As mentioned in Section 1.e., there are currently 41 registered companies, and fierce competition amongst them is anticipated. Also, with many established companies already active in the mark