The South Korea Financial Services Commission announced that the National Assembly has approved amendments to the Act on Electronic Financial Transactions that tighten requirements for payment gateway (PG) services, with a focus on safeguarding sellers’ unsettled funds and strengthening supervisory and enforcement tools following large-scale PG payment failures in July 2024. Under the amendments, PG services must externally segregate unsettled funds through deposits, trusts, or payment guarantee insurance, with the requirement ultimately reaching 100 percent. The externally managed funds cannot be transferred, used as collateral, confiscated, or set off by third parties, and a statutory priority right to payments is introduced for sellers. Sanctions are added for misuse of unsettled funds (up to 10 years’ imprisonment or a fine of up to KRW 100 million) and for noncompliance with external management duties or agreed settlement timelines (administrative fines up to KRW 50 million, and business suspension of up to six months), alongside corrective orders and the ability to revoke registration. The amendments also raise entry requirements by introducing a new quarterly transaction-volume tier above KRW 30 billion with a capital requirement of KRW 2 billion (KRW 1 billion continues to apply for operators above KRW 3 billion), require re-approval and re-registration when major shareholders change, mandate disclosure of compliance status, and more clearly confine PG services to fee-based third-party payment intermediation. A one-year grace period applies after promulgation, after which the external management requirement will be phased in from 60 percent in the first year of implementation to 80 percent in the second and 100 percent in the third. The revised Act is expected to take effect in December 2026, and the FSC plans to prepare subordinate regulations and issue implementation guidance ahead of commencement.

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