South Korea will officially adopt an open banking system, which is expected to bring big changes to the country’s banking industry and customers’ banking experience, in December. The plan was announced by the Financial Services Commission (FSC), Korea Financial Telecommunications and Clearings Institute (KFTC), and Financial Security Institute (FSI) on Thursday in a meeting with officials from banking and financial technology (fintech) industries, in which they gave updates on the government’s progress on adopting an open banking system to the country and timetables. The financial regulator will review participants’ security records and begin test run of the country’s open banking system in October before full service in December. Open banking is a system in which banks allow third parties, such as fintech startups, to have access to bank accounts and payment network. Under the system, lenders allow non-traditional financial services providers to have access to their financial payment networks, enabling bank customers to manage multiple bank accounts and withdraw and transfer money using a single app. Industry observers expect open banking would bring significant innovation to the banking industry and give new business opportunities to both traditional banks and fintech startups. Customers will benefit the most from improved banking experiences such as easier and cheaper transactions, as well as quicker and simpler process to change from one financial offering to another by comparing various financial products from different providers at one place. The FSC said all banks and fintech firms will be able to join the new open banking system. The country’s 18 banks that provide account services, including the country’s two internet-only banks Kakao Bank and K-Bank, will transfer their customers’ account information through opening banking networks. The FSC plans to receive applications from July from fintech firms that wish to be part of the system. The FSC is considering also adding savings banks, mutual finance and financial investment business entities with payment system functions to participate in the open banking scheme. Commissions that open banking participants should pay for using financial payment networks are set at one-tenth of the amount paid for using the traditional financial payment networks. Commissions for withdrawal and transfer services in an opening banking system will likely range between 30 won and 50 won and for deposit transfer 20 won and 40 won. The open banking system will in principle operate all day and night, except 20 minutes of downtime for security monitoring. Currently, financial payment network services are halted for one hour from 11:30 p.m. to 12:30 a.m. for safety check. The FSC will also continue to enhance security monitoring across the opening banking system to prevent any malicious activities such as hacking and voice phishing and to set up guidance on compensations for possible damages from financial accidents. ​ By Lee Sae-ha and Lee Eun-joo [ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]
South Korea will establish an open banking system in December. The country's Financial Services Commission (FSC) is planning to review potential participants' security records prior to this date while testing the system in October. In a statement released on Monday, FSC Chairman Kim Dong-yeon said that banks should be required to conduct background checks of customers and report suspicious transactions within 24 hours. The FSC will receive applications from financial start-ups during July. The plan is for the open banking system to operate 24 hours a day, save for a 20-minute period of downtime to facilitate security monitoring.