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Wanglian, China, attracted to amendments to the Korean Electric Money Act
Amid the conflict between the Bank of Korea and the Financial Services Commission, one of the most frequently discussed places is Wanglian, a clearing company in China. Wanglian is a fintech payment clearing company under the Chinese government established by Alibaba (9.6%), which operates Alipay, led by the People’s Bank of China (37.0%), and Tencent (9.6%), which is a WeChat Pay operator. With the rapid growth of the Pay market and various fraud cases, the Chinese financial authorities established Wanglian in 2018 to introduce external liquidation of the Pay market. In the meantime, it means that foreign financial transactions of Chinese pay companies must be made through’Wanglian’.
The Financial Services Commission’s position is that, like Wanglian in China, it should introduce external liquidation to the Pay market in Korea. Yoon Gwan-seok, the chairman of the National Assembly’s Political Affairs Committee, and Democratic Party lawmaker, submitted a proposal to amend the Pantomization Act in November last year.
However, controversy arose as Big Tech’s internal transaction was included as an object of external liquidation. Internal transaction refers to a transaction made inside a pay company. For example, it is a transaction sent by A using a pay company to B using the same pay service. According to the Financial Services Commission, as of the third quarter of last year, more than 14 million simple payments and remittances were made a day through the three Big Tech companies (Naver Financial, Kakao Pay, and Toss), of which 66% or about 9.3 million were internal transactions. The FSC’s position is that an external liquidation procedure for internal transactions is necessary for effective external monitoring of pay companies.
The Financial Services Commission said that it is necessary to record internal transactions such as payment details of pay companies through external liquidation. If you don’t see insider transactions properly, there’s no way to see how your deposits are used by consumers. The German Wire Card, which caused a huge fiscal injustice last year in Germany when spending customer funds at will, also aroused anxiety in the authorities.
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Is it really introducing’Big Brother’ that even China doesn’t do?
The Bank of Korea insists that China’s Wanglian also does not look into internal transactions. This is the part that Han Eun criticizes as’Big Brother’. The BOK argues that the inclusion of transactions that are terminated by internal accounting as liquidation targets cannot be found in the world.
However, financial authorities insist that the effectiveness of supervision is inferior without external liquidation of internal transactions. It is true that Wanglian of China does not include internal transactions, but in the case of China, the People’s Bank is an affiliate of the government (the State Council), and even holds the supervision of financial institutions. Even if they don’t see the internal liquidation of big tech companies through Wanglian, they don’t have a function because they can see any number of suspicious transactions by setting up a separate monitoring department under the People’s Bank.
An official in the Chinese financial industry said, “It is a formal story that the Chinese government (People’s Bank) does not look into fintech’s internal transactions. China’s financial system itself is different from Korea, such as the central bank directly oversight. “It’s a bit of a nuisance to say’doing things that China doesn’t do’ for just one part.” The financial authority (Financial Commission) has the authority to’supervise’ the financial industry in Korea. The Bank of Korea has the level of overseeing, not oversight, and the right to request data.
The People’s Bank of China is holding back the rein of fintech by accepting 20% deposits from big tech companies and raising them to 100% from 2018. In addition, it strengthened the supervision of paying companies and revoked 28 licenses in 2018 alone. Currently, People’s Bank is known to urge Alipay to convert into a holding company.
There is no such thing as’If you release it, it will be big’… Authorities concerned about the second private equity crisis
The private equity crisis last year also had an impact from the perspective of financial authorities. In 2015, the government eased regulations on private equity funds and excluded obligations such as disclosure of asset management reports applied to public offering funds for the growth of’Korean hedge funds’. The need to report investment targets and the obligation to report investment risk management matters has been eliminated. This was because, in order to give more profits to financial consumers, it was necessary to guarantee some degree of confidential investment assets and management methods of managers. However, after that, funds appeared in the dark, and in the end, an accident occurred last year.
An official from the political affairs committee said, “At the time of the successive financial accidents, the approach of’releasing the market will grow’ is no longer valid.
Finance Commissioner Eun Seong-soo recently met reporters and said, “When a financial accident occurs, you request and view data, not as you watch CCTV every day.” It is reported that the Financial Services Commission plans to prepare sub-regulations in the direction of requesting data submission when the bill is passed, when Big Tech goes bankrupt or when incidents or accidents such as fraudulent accounting occur.