China Alipay will enter the Korean market … Domestic law applied to entry

It is debated whether Alipay, China’s largest simple payment service, will enter Korea. Financial authorities said: “It is true that Alipay has investigated domestic law,” while Alipay said: “It is not a fact that it has examined the progress of services for home users.”

According to the Financial Supervisory Service on the 29th, Alipay investigated financial authorities earlier this year regarding the national electronic financial transaction law and registration plan. Alipay is a payment services division of Ant Financial, a financial subsidiary of Alibaba, China’s largest e-commerce company, with approximately 1 billion active users in Asia. An official from the financial oversight service said, “(AliPay) was constantly under review and inquired about the requirements earlier this year.”

The law on electronic financial transactions, about which Alipay has requested information, is about to propose an amendment in the form of legislative legislation. Most of the content of the global digital finance innovation plan announced by the Financial Services Commission in July is known to be included. The amendment should contain the same regulations as domestic finance companies when foreign “big tech” companies such as Facebook and Ant Financial enter the national electronic finance sector.

In the financial sector, if the amendment to the Electronic Financial Transactions Act is passed as is, it is expected that large overseas companies will not be able to enter Korea. According to the amendment, it is known that in order to register as electronic financial companies, foreign companies must establish branches in Korea and have a separate representative. In particular, in the case of a simple payment business, the full amount of the customer’s prepaid top-up must be entrusted to an external institution, just like a national simple payment company. This means that the top-up cannot be used for purposes such as investment as equity.

It is also known that Alipay has temporarily suspended the internal expansion review after confirming the above. An Alipay official said: “We strictly comply with local laws and regulations in all regions, including the Korea in which we currently operate, and are providing services to affiliates through local partners.” I will not comment on the speculation. “However, a Financial Supervisory Service official said:” I know Alipay is not doing well because it is difficult to meet the requirements of the national law after reviewing it. ”

Alipay is currently providing a franchise service to Chinese customers entering Korea. In 2015, it started an alliance service to enable Alipay payments at affiliated stores for Chinese tourists in Korea through domestic finance companies like Hana Bank and continues to expand the service. Meanwhile, it has invested directly in Kakao Pay, one of the large technology companies in Korea. Currently, 43.9% of Kakao Pay is owned by Alipay Singapore Holdings, a member of Ant Group.

In the financial sector, since Alipay has indirectly acquired experience in the domestic market, there have been numerous analyzes that demonstrate the possibility of starting a service for domestic users as well. In particular, the possibility of the entry of the global distribution company Alibaba in Korea was discussed, and the possibility of creating a “synergy” with Alipay was also envisaged. However, some analysts said: “Even if Alipay enters the country, it will be difficult to produce a significant commercial effect.” In the domestic market of simple online payments, Naver Pay, Kakao Pay and other large technology companies of Naver Financial have a strong influence and in the market of simple offline payments, NFC (Near Field Communication), Samsung Pay, boasts a high market share . Alipay uses a QR code authentication method for payment.

As the review of the Electronic Financial Transactions Act takes physical time, large foreign technology companies are expected to take a cautious stance on entering Korea for the time being in the financial sector. Some analysts say Alipay will not expand its business excessively after the Ant Group stock plummet earlier this month. A Financial Supervisory Service official said: “At present, there are no other large foreign technology companies that have requested information on the Electronic Financial Transactions Act other than Alipay.”

Reporter Sung Jiwon [email protected]