South Korean Government is planning to drastically reduce fee for using open financial payment network (open banking) for small FinTech startup companies.
It is going to reduce amount of open banking fee by about 90% compared to firm banking fee and offer even lower open banking fee to small companies.
As a result, small FinTech startups will have to pay between $0.018 and $0.026 (20 KRW and 30 KRW) for open banking fee that used to be between $0.35 and $0.44 (400 KRW and 500 KRW).
According to financial and IT industries, South Korean Government’s open banking fee system will be completed soon. Final draft will be drawn on the 15th.
Currently, FinTech companies pay between $0.35 and $0.44 to banks for firm banking fee. However, it is difficult for FinTech companies to make more profits as they have to pay more fees to banks as their businesses expand.
Although financial authorities have discussed with financial companies regarding converting firm baking fee system into open API (Application Programming Interface) system, there have been more conflicts between two groups. As a result, financial authorities called up chairmen of financial holding companies and decided to make open banking public to FinTech companies and legalize open banking.
However, financial authorities still struggled with coming up with appropriate amount of fees as there had been difference in opinions between financial industries and FinTech businesses.
However, it is confirmed that banks recently took a step back with coming up with appropriate amount of fees. It is likely that open banking withdrawal fee will be around $0.044 (50 KRW) while open banking deposit fee will be around $0.035 (40 KRW). Additional discount rate will be applied to already reduced open banking fee system for small startup companies that do not have many transactions. For these companies, withdrawal fee will be around $0.026 while deposit fee will be around $0.018. Companies that will be applied with these discounted rates will be selected based on their monthly turnovers and number of transactions.
Regarding these new fees, financial authorities called up vice-presidents of commercial banks last week to finish mediating calculation regarding open banking fees. Korea Financial Telecommunications and Clearings Institute is currently establishing a final fee system.
As negotiation regarding open banking fee system is nearing finish line, it is likely that application of open banking will take place much more.
However, there is still an issue regarding application of surety insurance.
In case of open APIs of Korea Financial Telecommunications and Clearings Institute, surety up to 300% of daily volume is obligated to prevent any security-related issue. According to The Bank of Korea, daily average amount of simple wire transfer is $86.3 million (98.2 billion KRW). In this case, about $264 million (300 billion KRW) of surety insurance must be prepared by companies.
Few companies are requesting alternative measure while stating that this is too much.
Besides this issue, there have to be re-authentication and individual consent from every user when converting firm banking users into open banking users. Regarding this issue, Korea Fintech Industry Associations established open banking department to discuss details with banks.
“Final open banking fee system is being mediated within Korea Financial Telecommunications and Clearings Institute.” said a representative for Financial Services Commission. “Detailed open banking fee system and alternatives will be prepared after going through a discussion on the 15th.”
Staff Reporter Gil, Jaeshik | osolgil@etnews.com