Over 40 Fintech companies operating as small and medium-sized (SMEs) businesses in South Korea reportedly were unable to clear the appropriate security checks needed to obtain final approval to take part in the open banking initiative.
The Fintech companies had applied for operational licences in order to offer open banking services in South Korea. However, their applications were rejected due to poor security measures, local sources confirmed.
Earlier this month, South Korea officially began its open banking service initiative, which is notably the Asian nation’s latest move to support greater convenience and lower costs when performing banking transactions.
As of December 18, 2019, the open banking platform is being offered to 16 local banks and 31 Fintech companies.
The Korea Times noted that 133 Fintech firms had applied for open banking licences. Out of these firms, only 48 Fintech SMEs managed to obtain approval on their business plans and were able to clear functional tests. More than 40 Fintechs reportedly failed the security checks performed by South Korea’s Financial Security Institute, which is the final step before approving licenses.
The report mentioned that the majority of Fintech SMEs were vulnerable to various security risks, and had not employed qualified security experts. The companies had also reportedly failed to implement relevant control procedures.
Chun Kil-soo, senior director general at the Financial Supervisory Service (FSS), stated:
“Because cybersecurity regulations on financial services companies are stricter than those on ICT firms, most small fintech companies will face difficulties in starting the open banking service.”
The Fintech SMEs may apply again after they’ve made the required improvements and updates to their existing security management systems.