[Open Forum] Why Are MyData Services for Consumer Benefit Tied Up by Regulation?

Since early 2022, “MyData” services have spread, beginning in the financial sector. Yet no successful MyData service model has emerged so far, leaving clear limits on the practical benefits users can enjoy. Why, then, have MyData services failed to gain traction?

MyData services offer several advantages. From the consumer’s perspective, they make it possible to receive new financial services that are personalized and tailored on the basis of data analyzing one’s assets and spending habits. From the perspective of the financial industry, they can help break the existing monopoly large financial firms hold over customer data. As a result, some have expected open innovation in finance to move forward in earnest.

Current services, however, are moving in a direction different from what was originally anticipated. They are often criticized for going no further than listing savings, installment savings, and loan products by interest rate, or suggesting recently popular credit cards.

This phenomenon stems from regulations under the Financial Consumer Protection Act. That law was introduced to prevent consumer harm caused by misselling. In reality, however, it is now hindering greater consumer benefit by making it difficult to activate MyData services.

In September 2021, the financial authorities classified several financial product comparison and recommendation services previously offered by MyData providers as illegal. This was because they interpreted such services as “brokerage” activities requiring separate licenses for each type of financial product. For example, an insurtech firm providing insurance comparison and recommendation services would need an insurance agency license authorizing insurance brokerage in order to continue operating.

The operations of these services deemed illegal have been suspended for quite a long time. The authorities said they would explore ways to permit such business activities, including the introduction of a regulatory sandbox, but no clear solution has yet been presented. The time has come for regulatory easing, including revisions to relevant laws.

Beyond deregulation, there is also the additional task of improving the institutional framework. The activation of MyData services must proceed in tandem with the establishment of a system for personal information self-management. If the MyData business moves forward without that process, there is a risk that consumers will be unable to play their role as the主体 of their own information. In other words, they may end up passively consenting to terms and conditions in order to use services, and after their information is transferred, they may have no way of knowing how it is being used. To substantively guarantee their right to informational self-determination, it is necessary to specifically consider measures to establish a personal information self-management system when advancing MyData policy.

MyData services, which were launched under government leadership, are now being constrained by the government itself. To create an environment for the free sharing of information, easing the Financial Consumer Protection Act and putting in place supporting institutional reforms are essential. The challenges mentioned above should be resolved as quickly as possible so that MyData services can fulfill the purpose for which they were originally introduced.

Mijin An, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 소비자 편익 위한 마이데이터 서비스, 규제에 발묶인 이유는?

Author: Mi-jin An

Date: 2023-02-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=6&idx=25418