Firm Banking Regulation to Be Toughened

According to the institute, there are 10,848 companies and organizations using the firm banking service, with the total transaction volume reaching 556.7 trillion won last year.(image: Kobizmedia/Korea Bizwire)

SEOUL, June 20 (Korea Bizwire) – The regulation on “firm banking,” the banking method used to pay for mobile phone bills, insurance premiums, or newspaper subscription fees, will be strengthened.

This is made possible by an agreement from the user through the Korea Financial Telecommunications and Clearings Institute that takes certain amounts of funds from the user’s bank account. After a deduction is made from the account, the user’s passbook is indicated as “FB,” meaning a firm banking transaction.

According to the institute, there are 10,848 companies and organizations using the firm banking service, with the total transaction volume reaching 556.7 trillion won last year. The number of small-scale companies that rely on third-party agencies for firm banking is 22,421 last year, with the transaction volume about 2 trillion won.

The banking regulators are watching keenly on these agencies as complaints surrounding unauthorized transfers have occurred mainly in these agencies.

The Financial Services Commission and the Financial Supervisory Service will establish a system whereby the regulators could monitor the performance of the agencies. Banks will be required to send text messages to bank customers every time a fund has been transferred through the firm banking service.

In addition, the regulators will mandate the agencies to use escrow accounts for the customers who deposit funds to the agencies’ own accounts. Any agency that does not comply with the new regulations will be subject to warnings and in some cases cancellation of the license.

Written by Sean Chung (schung10@koreabizwire.com)

Money (Follow us@Moneynews_Korea)