With financial authorities easing the real-name financial transaction system after 22 years, there are many expectations and worries about the financial industry at the same time.
The government's plan for the date and method to implement a non-face-to-face identification system is getting more detailed, and financial companies are welcoming the progress.
Banks, securities companies, asset management companies, savings banks, the National Agricultural Cooperative Federation, the National Federation of Fisheries Cooperatives, the National Credit Union Federation of Korea, the Korea Federation of Community Credit Cooperatives, member cooperatives, and the Central Post Office will all be affected by a change in the system. Insurance companies and credit card companies will be excluded from the change, since non-face-to-face identification is currently possible.
The government's move is widely acknowledged to mark a milestone in revitalizing the sluggish financial technology (fintech) market. Since the biggest stumbling block was removed, the creation of Internet banks is expected to gain momentum. The Financial Services Commission (FSC) is scheduled to announce measures for the establishment of Internet banks in June. Financial companies preparing to open Internet banks are keeping a close watch, and the establishment of related non-face-to-face identification systems is expected to swing into high gear.
Furthermore, the allowance of non-face-to-face identification is likely to go beyond the appearance of Internet banks and to bring about a revolution in the overall practice of financial transactions in the country. The big change is likely to intensify both competition between financial companies and competition between financial and non-financial companies, ultimately creating a change in the dynamics of the financial industry.
However, some in the industry worry that the implementation of a non-face-to-face identification system might aggravate the problem of identity theft or borrowed-name bank accounts. An official in the financial industry noted, “Under the circumstances that financial fraud is getting more sophisticated, it is possible for criminals to misuse the non-face-to-face identification system as a new window for crimes.” The official added, “So, it is essential to build a stronger security system first, using finger recognition or iris recognition methods, before the non-face-to-face identification system itself is implemented.”
A spokesperson for the FSC responded by saying, “We focused on securing stable transactions using verified methods several times. We will going through internally and externally-verified tests, and will not take any chances in financial frauds.” The spokesperson added, “Borrowed-name bank accounts are done in a way in which someone opens a checking account in person and transfers the account to a third party with money in return. So, the problem in the process of distribution is much more serious. It is difficult to say that the allowance of non-face-to-face identification methods will lead to an increase in the number of borrowed-name bank accounts.”
Four kinds of non-face-to-face identification methods suggested by the FSC are already being used in foreign countries like Japan, France, and Canada. Moreover, it will be possible for financial companies to build additional identification systems on their own, if two essential methods are executed.