With the amendments to Korea’s three main data privacy laws—the Personal Information Protection Act, the Act on Promotion of Information and Telecommunications Network Use and Information Protection, Etc., and the Credit Information Use and Protection Act—passed at the National Assembly earlier this year (to become effective from August 5, 2020) (collectively, the “Amendments”), a policy framework for “big data” business of financial companies was established.  However, the fact that financial companies have not been able to actively pursue their business in the newly introduced big data system despite their interest in this area necessitated further clarification in the permissible scope of big data business, types of information to be utilized, and procedural matters for utilization of information.

To address such needs, the Korean financial authorities announced on February 6, 2020 its initiatives to (i) proactively approve financial companies’ ancillary business related to big data and (ii) implement procedures and guidelines for utilization of financial data.

In addition, the Korean financial authorities recently announced the following measures to promote financial companies’ big data business and support new “convergence” by utilizing financial companies’ big data and combining financial data with data gathered from various other sectors. 

1.   Approval on Financial Companies’ Big Data-Related Ancillary Business 

With the Financial Supervisory Service’s approval of a major Korean bank’s report for big data-related ancillary business on April 9, 2020, other banks can now conduct the same type of big data-related ancillary business without being subject to the reporting requirement.  In particular, it is understood that the approved big data-related ancillary business is the bank’s business to convert, and process, its customers’ personal credit information into big data (e.g., anonymized data or statistics) to provide consulting services (or “data set”) for market surveys or marketing strategies and receive fees for such services.  Also, the financial authorities intend to proactively approve reports for big data-related ancillary business in other financial sectors. 

2.   Guidelines on Distribution of Data

The guidelines issued by the Financial Security Institute (the “FSI”) on the distribution of financial data (the “Guidelines”) came into force on May 11, 2020, detailing, among others, the permissible scope of data to be utilized and the utilization procedures.  In order to allow financial companies to pursue big data business without compromising their security, the Guidelines set out types of data products and utilization cases, data standards, pricing details, other considerations prior to execution of distribution agreements and follow-up measures.  Also, upon the Amendments becoming effective in August 2020, the Guidelines will be updated to be used in connection with combining and distributing of pseudonymized data as well.

3.   Data Exchange Platform and Data Vouchers

On May 11, 2020, the FSI launched a platform for exchange of data (the “Data Exchange Platform”), which is being test-run as a one-stop marketplace to encompass the entire process of data distribution, including data search, contract execution, settlement and analysis.  The Data Exchange Platform is an open forum in which financial and non-financial companies may participate to exchange or combine financial and non-financial (e.g., telecommunication) data.  Further, as the adequacy of measures taken to anonymize and pseudonymize data and to protect the information belonging to data consumers can be verified after the Amendments become effective in August 2020, the Data Exchange Platform will be able to offer a secure platform for data exchange.

Meanwhile, one of the main obstacles in invigorating data exchange in the Korean data market is the lack of consensus on the pricing between data suppliers and data consumers.  To address this issue, the Korean financial authorities plan to provide data vouchers (approximately in the amount of KRW 57.5 billion in 2020) to data consumers purchasing data via the Data Exchange Platform.  The application for these data vouchers will be made to and reviewed/approved by the FSI. 

With the foregoing measures, we expect that the scope of big data usage will be expanded from the current internal use to the development and use of various formats of big data sets necessary for market analysis, consulting, distribution and marketing.  The expanded scope will eventually lead to a comprehensive use of big data through the convergence of financial and non-financial data.  For example, financial data such as credit ratings, income level and consumer trends, when converged with non-financial data such as the public sector’s data encompassing geography, school districts and population, along with the private sector’s data ranging from telecommunication to social media, may be used to facilitate the development of customized marketing strategies for financial products and market analysis. 

In addition, after the Amendments become effective, the use or provision of pseudonymized data will be allowed without the data subject’s consent provided that the purpose of such use or provision is relevant to industrial research or statistical preparations.  Accordingly, as the data gathered for such a purpose can be combined freely with the information inherent to different industries, boundaries of the big data industry will likely broaden.

In light of the anticipated emergence of innovative big data-based financial services and the corresponding increase in opportunities for new business areas such as fintech and start-ups in the relevant fields, financial companies, as suppliers of financial information, will need to closely and actively monitor these channels and devise methods to expand their business opportunities in the big data market.