The South Korean Financial Services Commission (chairman Choi Jongky pictured) has already welcomed the fourth batch of financial service providers into its very new 'regulatory sandbox' while planning to promote Big Data with various initiatives and making 'Chinese walls' (which block the exchange of information between business units) easier to manage.

As part of the South Korean government's plan to promote digital business with the use of Big Data, the regulator has its own plans for a financial Big Data infrastructural initiative. This includes an open data system called CreDB (starting later this year and gradually becoming available for use by fintech firms) to be run by the Korea Credit Information Services; the creation of a financial data exchange (to be tested late next year) by the Financial Security Institute; and a new agency (i.e. regulatory body) for financial data that it wants to straddle the sectors. This last will require legislation. Choi Jongky wants the project to pave the way for further digital innovation and competition in finance and help create "a level playing-field for financial companies and fintech start-ups."

Meanwhile, the FSC has labelled another six financial service providers as ‘innovative financial services’ that it intends to welcome into its financial regulatory sandbox. On 12 June, it gave its approval to 32 services which are going to be tested as part of the scheme. They are: a simplified payment settlement agency service of online to offline(O2O) order payment services (Paymint); a platform for the transfer, management and settlement of small sums of money for lending circles (Kona I); an artificial intelligence(AI)-based service that evaluates SMEs (Who’s Good); a simple payment service that allows a customer to make payments through the SMS (short messaging service) verification process (Settle Bank); a service that calculates real-time price and mortgage values of real-estate properties using an AI algorithm (Big Value, Gonggam Lab); an "on-off overseas travel insurance" business (NH Property and Casualty Insurance, Rainist); and a mobile loan brokerage service using a smart phone application (Finset, Finda, Viva Republica, MyBank).

This comes after a shock announcement last month that the regulator had decided to block the formation of South Korea's third and fourth Internet-only banks, the first two being the successful K-Bank and Kakao Bank which opened their doors two years ago. Choi Jongky himself confessed to being as surprised as everyone else that the FSC's independent adjudicators had turned their thumbs down at the proposals. Kiwoom Securities, a brokerage, backed one initiative that the FSC said "lacked credibility and innovation," while an existing fintech firm called Viva Republica was frustrated in its request for permission to launch its latest venture because the consortium that it was heading lacked sufficient funds. As a sop to the two consortia, Choi Jongky invited them to apply again once they had resolved their deficiencies, claiming that the adjudication process was fair.

On a different subject, the FSC has recently announced its intention to help pass some legislation to reform the Financial Investment Services and Capital Markets Act to make the rules that call for 'Chinese walls' less stringent and to make it easier for financial investment companies to entrust their business to IT companies, the better to facilitate the emergence of innovative and specialised services. It plans to submit a bill to the National Assemby before the end of this month.

The 'Chinese wall' rules block the exchange of information between business units (such as corporate financing business, proprietary investment business and financial investment business) at financial firms. The FSC believes that they go into too much detail about implementation methods. It promises that, in future, "types of information, not types of business, will serve as a basis to apply the...rules - for example, 'material non-public information' should be separate from other information related to [the] management of customer property."

The regulator will draft the Bill with a view to providing basic principles only, leaving financial investment companies to implement those principles as they think fit. It will also attempt to expunge rules that presently require the physical separation of offices and prevent executives and other financiers from holding positions that straddle business units or affiliates. Instead, it wants to oblige firms to strenghen their control over "material non-public information" and establish business conduct rules to prevent conflicts of interest.