Financial Services Commision (FSC) appointed and announced 19 innovative financial services as it prepares to implement Financial Innovation Special Act. It selected these 19 services out of 105 services that applied for preliminary assessment for financial regulatory sandbox and it is planning to process them by end of this month.
However, some raised suspicion of poor assessment and favor for major corporations when FSC announced these 19 services.
According to industries, there has been a controversy surrounding ‘NFC (Near Field Communication) method of payment through a Smartphone application’ and ‘credit card-based remittance service’ that are innovative financial services announced by FSC.
These two services are by Paycoq and Shinhan Card respectively. However, Hankook NFC (President Hwang Seung-ik) raised an objection towards FSC’s selections.
“NFC method of payment that uses a Smartphone application as a payment reader is a service that we have been providing and we already have patents regarding the service.” said President Hwang Seung-ik of Hankook NFC. “We had filed civil complaints to FSC and all other agencies since two years ago.”
Hankook NFC is raising an objection towards the fact that FSC chose Paycoq as a preferential assessment candidate when it also applied with same service to be recognized as an innovative financial service. “FSC announced its result on selection of innovative financial services when it did not even look into detailed information of two companies that applied with same service.” said President Hwang. “This indicates that FSC is going to evaluate our plan for patent infringement first.” Hankook NFC is stating that it will have to cease its business in South Korea as it cannot perform its business anymore.
Meanwhile, Paycoq stated that it would take a legal action towards Hankook NFC for spreading false information.
“Because NFC technology is a technology that was introduced to markets, no business can claim that it has patents on fundamental technology of NFC.” said President Kwon Hae-won of Paycoq. “Hankook NFC is spreading false information without any clear understanding of its own service.”
“Because direction of our service compared to direction of Hankook NFC’s service and how our service is applied compared to how their service is applied are different, it does not make sense for them to start any dispute over patents. Because our service implements a card reader for a value added network-based seller through a Smartphone application, it has nothing to do with Hankook NFC’s service that is based on PG (Payment Gatway).” said President Kwon. “Paycoq established strategies against legal battles on patents by investing about $141,000 (160 million KRW) to analyze 20,000 patents related to payment along with Korea Intellectual Property Strategy Agency. We are going to make sure to have Hankook NFC, which is making speculative slander and illogical reasoning, responsible for its slander and obstruction of business.”
‘Credit card-based remittance service’ by Shinhan Card is also causing controversy for FSC’s suspicion of showing favoritism towards a major corporation.
This business model was patented by Paxmone (CEO Hong Sung-nam) in the past and it was given an approval by financial authorities earlier this year through an authoritative interpretation. For 3 years, it was not given an approval as it was seen illegal. However, financial authorities finally gave Paxmone an approval in February of this year. Although Paxmone was preparing to push this model with credit card companies, Shinhan Card came out with a similar model and was given an approval as an innovative financial service.
“We are confused by the fact that FSC suddenly selected Shinhan Card as an innovative financial service provider while we had been requesting an approval for this service for many years.” said CEO Hong Sung-nam of Paxmone. “Shinhan Card’s model is based on having a credit card company sending ‘cash’ to a receiver when a remitter makes a payment and we are not sure what financial authorities had been so worried about our model for many years.”
Regarding these controversies, FSC is stating that it is bit too hasty for affected companies to jump to conclusion when an evaluation committee has not even done any assessment. FSC ordered evaluation committee to gather opinions from every relevant party during its assessment process.
However, it is not clearly stated within committee’s evaluation criteria on if it needs to look into how much effort a competitor has put in to ease regulations to introduce its new service.
FinTech industry is stating that FSC and committee need to closely examine competitive market districts since there will be huge benefits for businesses that are selected by FSC and that FSC needs to establish an appeal system that can prevent any conflict.
Not only does a service that is selected as an innovative financial service can receive financial support to cover various tests, it can also secure an exclusive operating right within two years from the end of a testing period.
“It is difficult for us to make any sudden change to relevant systems when evaluation has not even take place.” said a representative for FSC. “However, we will look to improve issues that we may find during our evaluation process.”
Staff Reporter Gil, Jaeshik | osolgil@etnews.com & Staff Reporter Ryu, Geunil | ryuryu@etnews.com