By Lee Kyung-min
Fintech firms are criticizing the financial authorities' recent measures to limit their entry into the insurance sales business, pointing to the absurdity of the hastily arranged requirements to clarify the structure of their business models by Oct. 15.
This is the latest development of the financial regulator's efforts to curb the immense influence and market standing of financial services platforms, notably Kakao Pay, the financial subsidiary of Kakao Corp. and Naver, the country's largest portal operator.
The Financial Services Commission (FSC) recently ordered that the two halt services whereby their users were able to buy insurance products recommended via the online platform, a promotional activity the regulator said is prohibited under related laws governing financial consumer protection.
Kakao Pay has since suspended services recommending car insurance or offering a list of products it expects users would be interested in.
The suspension of the service is leading to an increase in complaints by fintechs whose primary business model is to generate algorithms to recommend insurance products that best meet the needs of consumers.
By law, sales of an insurance product, whether it is purchased directly by consumers following a search or through a promotional event, is banned if they are from those without an FSC-issued license.
Fintechs without such licenses have generated profit through collaboration with online platforms, a reason why they view the sudden tightening of rules as confusing not only for service providers but also customers.
They say that they understand the purpose of the regulator's strict interpretation of consumer protection. But they remain confounded as to what it means when the FSC's top priority is innovation through MyData business, the success of which is hinged almost entirely on the level of cooperation between fintechs and online platform operators unimpeded by regulatory hurdles such as obtaining licenses.
"Insurers seem to be the only ones coming out as a winner, a scenario hardly taken as desirable given they are not as successful or quick in embracing digitization as the rest of the new market entrants," an industry official said.