As shown by Apple Pay, Ali Pay and Bank Wallet Kakao, the mobile payment market is one of the very few sectors that is continuing to achieve a fast and steady growth ― a phenomenon that has led to the coining of the term “fintech,” a combination of “finance” and “technology.” 

However, experts said that excessive red tape is holding back the potential of the business in South Korea.

The mobile payment market here is growing at an average of 18 percent per year. The total market size is expected to reach 34 trillion won ($30.5 billion) by 2017, according to the Korea Institute of Finance.

Local financial authorities seem to be oblivious of such growth potential, as the Financial Supervisory Service recently sent out guidelines to domestic banks ordering them to cut the interest rates for online financial products to match those of their offline services.

The measure would effectively reduce the profit that the financial institutions have been reaping from their online and mobile businesses. 

“Mobile services are fundamentally different from conventional banking services, and it does not make sense to ban banks from applying differentiated interest rates and standards,” said Suh Byung-ho, a researcher at KIF.

Hana Bank, which recently launched Hana Wallet Account, an exclusive system for Bank Wallet Kakao, said the government has made some deregulation attempts, but pointed out that most online financial transactions still have to undergo strict evaluations.

“The mobile financial market may never gain full momentum unless regulations precede customer convenience,” said one Hana Bank official. 

Local pioneers such as Bank Wallet Kakao by Daum Kakao and PayNow by LG Uplus tend to offer simpler mobile financial services, but they too are faced with heavy regulations, such as obligating users to go through certificate verification, which is not required with Apple Pay or Ali Pay.

The current law also prohibits nonfinancial companies such as information technology firms to independently launch financial services.