Korea’s FSS confirms suspicion Kakaopay received illegal kickbacks

[Courtesy of Kakaopay]

The Financial Supervisory Service (FSS) has confirmed an allegation that Kakaopay Corp. had received illegal subsidies from NICE Information & Telecommunication, a leading value-added network (VAN) operator, and requested the police to investigate.

According to sources on Tuesday, the FSS recently investigated and discovered that Kakaopay had received illegal subsidies indirectly from NICE Information & Telecommunication. Last month, the FSS reported the findings to the police and requested a thorough investigation.

Kakaopay commissioned NICE Information & Telecommunication with the task of recruiting offline Kakaopay payment merchants. However, during the FSS’s examination, it was revealed that NICE Information & Telecommunication paid the money owed by Kakaopay to the agent responsible for recruiting merchants.

Under the specialized credit finance business act, large credit card companies like Kakaopay are prohibited from demanding or accepting unreasonable compensation from VAN providers under the pretext of utilizing their credit card value-added network services. Similarly, VAN providers are not allowed to offer unjustified compensation to large credit card merchants.

NICE Information & Telecommunication is estimated to have paid out hundreds of millions of won to those agents on behalf of Kakaopay between 2021 and 2022. The FSS suspects that NICE Information & Telecommunication provided compensation to maintain its VAN transaction relationship with Kakaopay’s payment business.

NICE Information & Telecommunication builds networks between card issuers and merchants and acts as an intermediary for transactions, charging fees for its services. NICE Information & Telecommunication reportedly relays the majority of credit card payments through Kakaopay online.