SOUTH KOREA Law and Practice Contributed by: Jongbaek Park, Seungil Hong, Seyeong Im and Eric Jeong, Bae, Kim & Lee LLC
Bae, Kim & Lee LLC Centropolis B 26 Ujeongguk-ro Jongno-gu
Seoul 03161 South Korea
Tel: +82 2 3404 0000 Fax: +82 2 3404 0001 Email: bkl@bkl.co.kr Web: www.bkl.co.kr/law?lang=en
1. Fintech Market 1.1 Evolution of the Fintech Market
ogies like generative AI and the passing of the Frame - work Act on the Development of Artificial Intelligence and Establishment of Trust (which came into force in January 2026), the regulators released a revised draft of the AI guidelines for the financial sector in late 2025. This revised guidelines iare scheduled to take effect in the first quarter of 2026 after taking into account the feedback from the financial industry.
There have been significant changes in the fintech industry in Korea in recent years. Some of the key changes are as follows. The most notable change is the amendment to the Electronic Financial Transactions Act (the “EFTA”) regarding payment gateway (PG) services. While PG services were previously subject to relatively loose regulations, the financial authorities have now codified a strict separation of settlement funds from a com - pany’s operating capital. Specifically, under the amended EFTA, PG service providers are required to deposit or entrust 100% of their settlement funds with external institutions, such as banks, or subscribe to payment guarantee insur - ance. Failure to comply will result in severe sanctions. In addition, the legal right for sellers to receive prefer - ential payment of settlement funds – even in the event of a PG company’s bankruptcy – has been clearly established. Small business owners can benefit from a safer industry environment to expand their business channels with less concerns around liquidity issues of PG service providers. The use of generative AI technology by financial insti - tutions is expanding. In the past, the financial super - visory authorities have established frameworks for adopting AI technologies, such as the “Guidelines for AI Operations in Finance” and the “Manual for AI Development and Utilisation in Finance”. However, considering the widespread adoption of new technol -
2. Fintech Business Models and Regulation in General 2.1 Predominant Business Models
The business models of fintech companies in Korea are continually evolving as they combine existing financial technologies with newly emerging financial innovations, such as digital banking, mobile/online payments, peer-to-peer (P2P) lending, robo-advisers, blockchain and cryptocurrencies, digital insurance platforms, open banking, algorithm trading, crowd - funding, AI-based financial services and super-appli - cations. Most recently, the strongest players emerging in the fintech sector have been internet-only banks, virtual asset service providers (VASPs) such as cryptocur - rency exchanges, and electronic payment service providers, among others. Many of these emerging players were start-ups that have now become large companies. Legacy players are also rapidly evolving by applying fintech business models to their existing licensed ser - vices. For example, commercial banks are providing
756 CHAMBERS.COM
Powered by FlippingBook