Amendment to Internet-only Bank Act Voted Down

The National Assembly unexpectedly voted down an amendment to the Act on Special Cases concerning Internet-only Bank on March 5. On the other hand, the National Assembly is expected to pass an amendment to the Passenger Transport Service Act.

The former amendment is to delete the history of Fair Trade Act violations from the requirements for the approval of Internet-only bank shareholders’ extra shareholdings. Previously, it was pointed out that the application of the same requirements to existing financial companies and Internet-only banks was excessively strict in view of the oligopolistic structure of the ICT industry of South Korea. The regulation made it difficult for KT and Kakao to become the largest shareholders in K-Bank and Kakao Bank, respectively.

Those in the industry predicted that the amendment would help ICT companies become the largest shareholders in Internet-only banks and lower the entry barrier in the domestic financial sector to cause more competition. With the number of Internet-only banks in Asia estimated to reach 50 this year, many pointed out that South Korea would be well advised to accelerate innovation in its financial sector. In the end, however, the National Assembly blocked the innovation again, reiterating that more interconnection between banking and commerce would help conglomerates enter the financial sector.

The National Assembly’s move against innovation is likely to be repeated in the case of the latter amendment, which is to incorporate Tada into the Ministry of Land, Infrastructure and Transport’s regulations. Once the amendment is passed, platform-based passenger transport service providers such as Tada must obtain an additional license by paying a contribution. In addition, 11- to 15-seater rental cars will be limited in terms of driver placement, which means Tada’s business will have to be stopped. The company already announced that it would stop the Tada Basic Service.