More Apple financial services unlikely to be available in Korea soon: BOK

Tougher regulations for Big Tech firms' finance business may come

This photo shows a customer using Apple Watch to make payment through Apple Pay (Hyundai Card)

Despite the recent launch of Apple Pay in Korea, it is unlikely that other financial services offered by the US tech giant will be available in Korea soon due to legal issues, the Bank of Korea projected.

Apple kicked off its mobile payment service, Apple Pay, in Korea with partner Hyundai Card in March. Yet, its other financial services such as Apple Card, Apple Cash and Apple Pay Later are currently available only in the US.

The firm’s plan to launch financial services other than Apple Pay outside of the US has not been confirmed yet, and if they are to be introduced in Korea, they will have to be screened under the law, the central bank's report said.

"It will be difficult for Apple’s financial services other than Apple Pay to be available in Korea in a short amount of time due to legal, institutional regulations," the report said.

For instance, for Apple Cash -- an online payment solution similar to Naver Pay and Kakao Pay -- the related law regulates registration of an issuer of electronic debit payment means.

It took a while for Apple Pay to debut in Korea as its terms and conditions were screened by the country's top financial regulator, the Financial Service Commission.

Apple’s savings account service, which recently caught attention with a 4.15 percent interest rate, and its “buy now, pay later” service, Apple Pay Later, have to be designated as innovative financial services by the Korean regulator if they are to be launched in Korea. The innovative financial service designation also comes with tight regulations on business boundaries.

On the other hand, Apple Card can be launched in Korea if Apple joins hands with a local card issuer. There are already a number of private label credit cards issued in Korea in collaboration with card issuers and retailers, such as Naver-Hyundai Card, the report explained.

There is speculation that Hyundai Card, the partner of Apple Pay, could launch the Apple Card service in cooperation with Apple.

Meanwhile, the report assessed Apple will experience difficulties in competition if other financial services debut in Korea, as local Big Tech companies such as Naver Financial, Kakao and Toss already offer similar services.

"However, seeing the example of Apple Pay, Apple may take up significant share of the local market as younger generations have a high preference for iPhone and related services,” it read.

The report viewed that if more global big tech firms make their way into the local financial industry, strengthened regulations may be needed due to antitrust concerns and threats to financial stability.

Also, it will lead to more calls to ease the regulations on the separation of finance and commerce. Over the past years, local banks have been requesting a lift in the related regulations so that the lenders can operate non-financial businesses to diversify their portfolios.

"Deeming that Apple is trying to strengthen its 'Apple ecosystem' by offering interconnected financial services centering on Apple Pay, it will make a decision on the introduction of other services by monitoring how the payment service settles down in Korea," the report read.

"Related regulations and monitoring system need to be revised, as Apple could push further into the financial market by joining hands with existing financial firms."

Tougher regulations for tech firms' finance business may come

Despite the recent launch of Apple Pay in Korea, it is unlikely that other financial services offered by the US tech giant will become available in Korea soon due to legal issues, the Bank of Korea projected.

Apple stirred a sensation in Korea by kicking off its mobile payment service, Apple Pay, with local partner Hyundai Card in March.

As Apple has been actively extending its foray into finance by running diverse financial services such as Apple Card, Apple Cash and Apple Pay Later in the US, anticipation has grown as to whether the services could become available in Korea soon.

However, a report issued by the central bank on Monday suggested the services will not be available here shortly, as they have not yet been introduced outside of the US, and if they are to be introduced in Korea, each service will have to meet the requirements of different laws, the central bank's report said.

“The firm’s plan to launch financial services other than Apple Pay outside of the US has not been confirmed yet,” the report said. "It will be difficult for Apple’s financial services other than Apple Pay to be available in Korea in a short amount of time due to legal, institutional regulations.”

For instance, for Apple Cash -- an online payment solution similar to Naver Pay and Kakao Pay -- the related law regulates registration of an issuer of electronic debit payment means.

It took a while for Apple Pay to debut in Korea as its terms and conditions were screened by the country's top financial regulator, the Financial Services Commission.

Apple’s Apple Card savings account, which recently seized attention with its 4.15 percent annual percentage yield, and its “buy now, pay later” service, Apple Pay Later, have to be designated as innovative financial services by the Korean regulator if they are to be launched in Korea. The innovative financial service designation also comes with tight regulations on business boundaries.

On the other hand, Apple Card can be launched in Korea if Apple works in tandem with a local card issuer. There are already a number of private label credit cards issued in Korea in collaboration with card issuers and retailers, such as Naver-Hyundai Card, the report explained.

There is speculation that Hyundai Card, the partner of Apple Pay, could launch the Apple Card service in cooperation with Apple.

Meanwhile, the report assessed Apple will experience difficulties in competition if other financial services debut in Korea, as local big tech companies such as Naver Financial, Kakao and Toss already offer similar services.

"However, seeing the example of Apple Pay, Apple may take up significant share of the local market as younger generations have a high preference for iPhone and related services,” it read.

The report viewed that if more global big tech firms make their way into the local financial industry, strengthened regulations may be needed due to antitrust concerns and threats to financial stability.

Also, it will lead to more calls to ease regulations on the separation of finance and commerce. Over the past years, local banks have been requesting to relax related regulations so that the lenders can operate nonfinancial businesses to diversify their portfolios.

"Deeming that Apple is trying to strengthen its 'Apple ecosystem' by offering interconnected financial services centering on Apple Pay, it will make a decision on the introduction of other services by monitoring how the payment service settles down in Korea," the report read.

"Related regulations and monitoring system need to be revised, as Apple could push further into the financial market by joining hands with existing financial firms."

By Im Eun-byel(silverstar@heraldcorp.com)