Starbucks Korea's vast pre-paid funds fall outside financial regulation

Starbucks Korea is holding approximately 427.5 billion won in pre-paid customer funds, a figure that rose by 8.22% to reach 427.56 billion won by the end of last year. This represents money customers have loaded onto Starbucks cards or apps for future purchases.

Amid recent controversies, consumer groups are demanding that Starbucks Korea offer unconditional refunds for these pre-paid balances. However, the company operates in a regulatory gray area. Under current South Korean law, Starbucks is not classified as a pre-paid electronic payment service provider subject to strict financial authority oversight.

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Starbucks (pre-paid funds) falls under the jurisdiction of the Fair Trade Commission's terms of service and the Electronic Commerce Act, not financial regulations. Currently, we are not considering expanding the scope of the Electronic Financial Transaction Act to include pre-paid service providers.

This exemption stems from the fact that Starbucks issues and uses its own payment method, making it its own service provider. Furthermore, all its stores are directly managed by the headquarters, meaning it is treated as a single entity rather than multiple franchises. This classification allows Starbucks to avoid the stringent disclosure and management requirements imposed on registered pre-paid services like Naver Pay or Kakao Pay.

According to Starbucks Korea's terms of service, customers must use at least 60% of their pre-paid balance before they are eligible for a refund. This policy, based on fair trade commission guidelines for gift certificates, limits the ability of customers to receive a full refund. A legal expert suggested that including Starbucks under the Electronic Financial Transaction Act would better protect consumers, given the concerns about the opaque management of these funds and refund limitations.

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The regulations for pre-paid services under the Electronic Financial Transaction Act are intended to ensure the reliability of financial transactions by guaranteeing preferential payment rights for users. If there are significant user concerns about refund restrictions and opaque fund management, including them under the Electronic Financial Transaction Act would align with the law's purpose.