2024.9.15. Revised Electronic Financial Transactions Act Implementation! New Risk Management Solutions for PG and Prepaid Business Operators

On September 15, 2024, the revised “Electronic Financial Transactions Act” (hereinafter "the Revised Act") came into effect, significantly strengthening regulations related to prepaid electronic payment means. This article introduces the main contents of the revised Electronic Financial Transactions Act and the changes companies should be aware of, and explores the implications.

• Strengthening of Prepaid Charge Protection Obligations (Revised Electronic Financial Transactions Act Article 25-2)

One of the important changes in this revised Act is the establishment of prepaid charge protection obligations. The prepaid service provider must separately manage an amount equivalent to more than 50% of the prepaid charge amount as stipulated by presidential decree through a prepaid charge management institution, such as a bank, as stipulated by presidential decree.

Furthermore, the prepaid service provider must keep the prepaid charge in a safe manner, such as through trust, deposit, or payment guarantee insurance. This protects the users' deposits from being seized, transferred, or provided as collateral by external parties. Failure to comply with the separate management obligation for prepaid charges may result in penalties and suspension of business.

• Strengthening of Prepaid Service Registration Criteria (Revised Electronic Financial Transactions Act Article 2, Article 28)

According to the Revised Act, registration is exempt only when the outstanding balance of the prepaid electronic payment means is less than 300 million KRW and the total annual issuance amount is less than 500 million KRW. It has also refined the management of the amount required for guarantees or insurance for prepaid electronic payment means issued free of charge.

Meanwhile, the reasons for exemption from prepaid service registration have been narrowed, so that registration is exempt only when issuing prepaid electronic payment means that are used only at a single merchant. That is, the exemption requirements are met only when the number of merchants is single, and accordingly, issuers of prepaid electronic payment means used at various merchants are required to fulfill registration obligations.

Also, paper-based certificates converted electronically are also defined as prepaid electronic payment means and included in the scope of regulation. Along with this, the definition has been expanded to include prepaid electronic payment means used only by parent or subsidiary companies.

• Refund of Prepaid Charges (Revised Electronic Financial Transactions Act Article 19)

Furthermore, the Revised Act has expanded the reasons for which consumers can receive a refund of prepaid electronic payment means. Companies must include in their terms and conditions that they must pay the full amount of the balance if they unilaterally change the usage terms of the prepaid electronic payment means or reduce the number of merchants. However, this may be excluded in exceptional situations such as merchant closure.

• Establishment of Prepaid Service Provider Behavior Rules (Revised Electronic Financial Transactions Act Article 27)

The Revised Act newly adds behavior rules to protect users by the prepaid service provider. Accordingly, only prepaid service providers with a certain degree of financial soundness can issue prepaid electronic payment means at a discount or pay credit points to users, thereby limiting the provision of economic benefits to users.

Companies providing electronic payment agency (PG) services or prepaid charging services need to prepare carefully before the expiration date of the prepaid service provider registration grace period (within 6 months before the effective date).

If newly registering as a prepaid service provider, the necessary capital must be secured, related administrative procedures must be completed, and if the usage terms of the prepaid electronic payment means are changed or the number of merchants is reduced, a refund obligation may arise, so merchant contract conditions must be checked.

Also, the prepaid charge management system should be checked to ensure that prepaid charges are kept safely through trust, deposit, or payment guarantee insurance methods, and the company’s comprehensive situation should be considered to reflect the requirements of the revised law.

This revised Act strengthens the obligation for companies providing prepaid charge services to register as prepaid service providers and comply with legal requirements. Accordingly, companies operating points and similar services need to expedite the preparation of prepaid service provider registration procedures in accordance with the revised law, and the legal expert with deep understanding of the registration eligibility and legal requirements under the e-commerce related laws should carefully review the issue.

Law firm Veat provides the latest legal advice based on in-depth analysis and interpretation of important legal changes such as the revised Electronic Financial Transactions Act, so that companies can minimize legal risks and continue stable business operations.

Law firm Veat designs customized response strategies that reflect the specific business model and operating status of each company when providing legal advice, supporting electronic financial service providers to maintain business flexibility while complying with the law.

Law firm Veat provides optimal legal solutions for companies pursuing both legal compliance and innovative growth, and will be a trusted partner to help them maintain safe and efficient operations even under new regulations.

If you have any questions regarding the revised Electronic Financial Transactions Act, please contact Law firm Veat.

​Thank you.

Law firm Veat