[Exclusive] 4 Out of 5 Financial Sandbox Designations Go to Large Institutions... Fintechs Stuck in 10% Range for 3 Consecutive Years [Innovation-Free Innovative Finance] ①

Regulatory Exemptions in the 'Innovative Financial Services' System
Share of Large Institutions Rises from 33% in 2019 to 81% as of July This Year
Park Jun-tae: "Review System Needs Improvement"

Fintech (finance + technology) companies, expected to drive innovation, are increasingly being marginalized in the designation of innovative financial services, which is intended to offer opportunities to test new financial services in the market. Critics argue that the system is being operated contrary to its original purpose since most approved applications come from traditional financial institutions.

According to data from the office of Park Juntae, a member of the National Assembly’s Political Affairs Committee, received from the Financial Services Commission on September 15, the proportion of designations given to small fintech companies has been lower than that of large financial institutions since the introduction of the system in 2019 up to July of this year. Large financial institutions refer to banks, credit card companies, insurance companies, and securities firms, while small fintech refers to fintech and big tech companies that are not traditional financial institutions. The innovative financial services system grants regulatory exemptions to services that demonstrate differentiation in terms of content, method, or form in the provision of financial services or related work. Designations are made by the Financial Innovation Review Committee of the Financial Services Commission, which selects services after considering their level of innovation and consumer benefits.

Specifically, apart from 2019, when the ratio for small fintech companies was higher than that for large financial institutions (59.7% vs 32.5%), the figures have consistently been lower for smaller players. From 2020 onward, with the exception of 2023 (42.9%), the share for small fintech has remained in the 10–20% range: 14.6% in 2024, 13% in 2025, and 17.1% as of July this year, marking three consecutive years in the teens. By contrast, large financial institutions have consistently maintained a 50–70% share. Notably, their ratio exceeded 80% for the first time in 2024 (82.9%), followed by 84% in 2025 and 80.5% as of July this year, sharply contrasting with fintech’s continuing low figures.

Large financial institutions have also maintained dominance in the ratio of designated approvals to total applications. From 2019 through July this year, large financial institutions submitted 971 applications for innovative financial services, of which 852 were approved—a designation rate of 88%. For the five years from 2019 to 2023, all applications from large financial institutions were designated as innovative financial services (100% rate). The rates then declined to 88% in 2024, 96% last year, and 33% this year. In contrast, small fintech companies have had 217 out of 319 applications approved, for a rate of 68%. Their designation rate began at 87% in 2019, reached 100% between 2020 and 2022, but dropped to 96% in 2023, 51% in 2024, 71% last year, and only 22% as of July this year.

The Financial Services Commission has also acknowledged problems with the innovative financial services system and has introduced improvement measures. In June of this year, it announced “innovation-friendly improvement measures for the financial regulatory sandbox system,” which include expanding exclusive operating rights for promising innovative services and refining review standards.

The fintech industry argues that the system needs to be redesigned to reflect the unique nature of the sector. One fintech company representative stated, “It is difficult for fintech companies to be designated as innovative services because their unique characteristics are not considered at the review stage. There are also structural limitations to competing with traditional financial institutions once the period of designation ends.” In response, industry players are suggesting operating separate review tracks for fintech companies and traditional financial institutions, as well as adopting conditional approvals. Conditional designation refers to granting innovative financial service status if the innovation level is outstanding, even if human or material requirements are somewhat lacking, on the condition that these requirements are later supplemented.

Assemblyman Park Juntae stated, “As opportunities for innovative finance increasingly concentrate among large financial institutions, the space for fintech companies is shrinking. It is necessary to improve the review system so that the fintech industry has sufficient momentum to introduce new services.”

This content was produced with the assistance of AI translation services.