After a slow start, the South Korean Financial Services Commission is preparing to devote a large part of its attention to the promotion of financial technology or 'fintech' business. Part of its effort is a loosening of regulations that new start-ups have to satisfy in their first months of life.

FSC Chairman Choi JongKu (pictured) outlined the FSC’s policy priorities for FinTech innovation at a meeting with fintech entrepreneurs, executives of financial institutions and investors. He was dressed, appropriately, in a track suit top. He said that the groundwork for regulatory, budgetary and institutional support for new FinTech initiatives had been done and pledged that the FSC would "spare no effort to support fintech companies to come with globally competitive services and spread fintech innovation across the financial sector.”

The Korean regulator has decided to tread the well-worn path of opening a co-called financial regulatory sandbox in April 2019. This, like most initiatives given the title (outside the United States) will allow fintech companies to test their innovative services with regulatory exemptions for a certain period of time - in his speech he hinted that it could be months or years. Preliminary applications for participation will be welcome at the end of January. The FSC will provide 4 billion won (US$3.6 million) to support the plan of action.
 
Chairman Choi also promised that the FSC would "remove regulatory uncertainty that restricts financial companies from investing in fintech companies." In principle, financial companies are prohibited from investing in non-financial companies, except ones closely related to financial services. Financial companies, by contrast, are allowed to invest in fintech companies because the FSC’s reading of the law is that fintech falls into a category of businesses closely related to financial services. To facilitate investment in fintech, the FSC will amend relevant regulations for clarification on the scope of business in which financial companies are allowed to invest. The FSC will also boost investments by venture capital and private equity funds in fintech.  

The regulator, according to Chairman Choi, is reviewing more than 200 regulations with an eye to reform. He will announce the results of these reviews sometime in this quarter of the year. The FSC will also hold a weekly meeting with fintech businesses to gather their suggestions and opinions.

The National Assembly passed the Financial Innovation Support Act on 7 December. It will take effect in March 2019, and lays the legal foundation for the introduction of a regulatory sandbox for innovative financial services. A review committee will be established under the FSC with financial officials and experts in technology, finance, laws and consumer rights to review applications and designate an “innovative service” provider. The designated service providers are to be allowed to test their new services for a maximum of two years in an environment where certain regulations are to be exempted. If there is a concern about irreversible damage to consumers or undermining financial stability, regulatory exemptions should not be allowed. Firms that aspire to be known as "innovative financial service providers" are required to submit their plans for consumer protection and risk management. An FSC document warns that in the event of legal action against an innovative financial service provider, the burden of proof will fall on the business provider to prove that there was no intention or negligence for damages.