South Korea's financial authorities are considering introducing a cap on fee rates for online loan comparison and brokerage platforms, spreading tension across the fintech industry. Concerns are also emerging that the fintech ecosystem built around loan platforms could shrink, contrary to regulators' aim of inducing lower lending rates at savings banks and other non-bank lenders.

The financial sector said on Wednesday the Financial Services Commission is reviewing a plan to revise an enforcement decree under the Moneylending Business Act to apply limits on brokerage fee rates to online loan brokerage platforms as well.

The current enforcement decree limits the fee rate that offline loan brokers can receive. Fintech companies are classified as online loan solicitation corporations under the Financial Consumer Protection Act and have not been subject to a separate fee cap. A revision is reportedly being actively discussed to apply the same regulatory framework.

The backdrop to the authorities' move to intervene in platform fees is the lending-rate burden at non-bank lenders, especially savings banks. The perception is that savings banks pay higher platform brokerage fees than commercial banks, and that the costs are reflected in lending rates for mid- to low-credit borrowers. Commercial banks on platforms currently pay fees of about 0.2 to 0.3 percent of loan amounts, while savings banks are bearing fees in the mid-to-late 1 percent range.

A key issue is whether platform fees are reflected in lending rates. The savings bank industry argues that high fees can be passed on to loan rates, and that lowering them could reduce lending rates.

The fintech industry, meanwhile, believes cutting brokerage fees could mean that savings banks use the savings over the long term as a way to shore up profitability.

Another criticism is the view that platform fees are simply a cost. The fintech industry stresses that loan platforms have served as marketing channels for savings banks. It says costs once spent on TV, portal and outdoor advertising could be cut sharply through platforms, and that fees are only about half the statutory fees paid to offline loan solicitors. It also says commercial banks pay low fee rates because strong in-house channels reduce their reliance on platforms.

Small and mid-sized fintech companies, in particular, see the regulation as directly tied to their survival.

Large platforms represented by Naver Pay, Kakao Pay and Toss have various revenue sources such as payments, remittances and advertising. But concerns are growing that for smaller fintech firms, where loan brokerage is effectively the only business model, fee cuts could make it difficult to keep operating. Some estimate large operating losses would be inevitable once fixed costs are taken into account.

Debate is expected to continue for the time being over whether the authorities' fee regulation can meet the policy goal of lowering lending rates or instead lead to weaker competitiveness across the fintech industry.

A fintech industry official said large platforms have leeway to spread the shock, but fintech companies specialising in loan platforms face a matter of survival. "It is asking everyone to die together, so we cannot accept fee cuts," the official said.

A savings bank official said savings bank customers do not take on more risk, yet banks are charged a little while savings banks are charged several times more, which is excessive. "We are only asking whether it can be lowered a bit more reasonably," the official said. "In cases where loans are made and become delinquent, brokers do not bear responsibility for the risk either. Charging different rates when there is no responsibility at all is excessive," the official added.