Korean regulator to revamp rules to ease bank service outsourcing

[Courtesy of FSC]

The South Korean government is loosening regulations on bank outsourcing to promote the development of innovative financial products like Hana-Naver Bank Book, which is referred to as the Korean version of an Apple Bank account.

The government is also introducing measures like joint banking agency to address low accessibility to banking services caused by bank branch closures, allowing all commercial bank services available at joint banking facilities or post offices.

The Financial Services Commission (FSC) said on Thursday that these measures were discussed during a task force meeting on banking system improvement.

Currently, Korean securities firms can freely collaborate with information technology and fintech companies to provide various financial services within the legal framework. However, banks have been restricted in financial innovation due to the prohibition on outsourcing their essential services.

Banks have shown significant demand for collaboration with fintech companies for various financial products. One notable example is the launch of Hana-Naver Bank, designated as an innovative financial service.

“We will seek to improve the banking outsourcing regime by learning from the examples that have operated under the innovative financial services designation and have not experienced problems,” said Kang Young-soo, head of the FSC’s banking division.

The FSC plans to reclassify existing essential tasks into core tasks and non-core tasks and finalize improvement measures to allow outsourcing for non-core tasks and other non-essential tasks by the end of September.

If the regulations on bank outsourcing are significantly relaxed, it will create an environment where fintech companies can freely cooperate with banks and help introduce a variety of innovative products. While Hana-Naver Bank Book faced limitations with a restricted issuance of 500,000 accounts and new registrations remain suspended after just five months, such restrictions are expected to disappear in the future.

The banking system improvement task force also plans to consider institutional improvements to enhance financial accessibility, enabling consumers to conduct bank transactions at post offices, for example, further expanding the reach of financial services.