South Korea’s Progress on Mobile Payments AdoptionSabrina Tharani |
Just eight short months after the Mobile Payments Readiness Index was released, the Global Insights team has already started to observe some markets making great strides on the path to widespread mobile payments adoption. South Korea in particular, which earned the sixth spot on the Index, has made significant progress in financial services and partnerships while maintaining high levels of consumer readiness.
A recent report by Celent aligns the findings of the MPRI with a snapshot of improvements being made to the mobile payments landscape in South Korea. Here’s a breakdown of how:
Affordability and Competitiveness of Financial Services
The MPRI analysis recommended that action should be taken to make South Korea’s financial services more affordable and competitive, thereby laying the foundation for better coordination between banks and other members of the mobile payments ecosystem. Advances in this space can be seen in the increased number of payment cards issued and transactions per day. Since 2007, the number of payment cards issued has grown at a compound annual growth rate (CAGR) of 8 percent, reaching upwards of 264 million cards in 2011, while card-based transactions per day have reached 23.4 million, a very aggressive CAGR of 20.9 percent. The average South Korean resident has about 2.5 payment cards, while the affluent have 4.9 cards. This surge in card ownership signifies the increased access to the banking-like services that are correlated to adoption of mobile POS, m-commerce and P2P payments.
Partnerships committed to mobile payments’ long-term growth
Strategic partnerships are a key variable in the success and adoption of mobile payments in South Korea – one that the MPRI deemed critical for long-term growth. Several new players have since entered the arena, improving the potential for partnership efforts. In March 2012, Kookmin Bank launched a mobile payments business. This was shortly followed by Hana Bank, Shinhan Bank, and the Industrial Bank of Korea; by September 2012, the regional bank Jeonbuk had a program in place.
At the same time, mobile phone services have forged partnerships with payments networks and banks, focusing on digital wallet initiatives. One of Korea’s largest operators, Korea Telecom, has been able to successfully leverage NFC technology through the launch of the mobile wallet, Olleh Touch. By partnering with Korean card issuers, Olleh Touch supports both PayPass and payWave standards. Finally, South Korean retailer Shinsegae recently launched mobile payments initiatives that engage banks and telcos.
Alternative mobile payment means
South Korean consumers were among the most willing, and greatest users of, P2P and mobile commerce payments on the MPRI, but lagged in POS usage. This is because of the lack of NFC compatible terminals in South Korea (only 80,000 devices in October 2012 according to Oliver Wyman). While terminalization is expanding, consumers eager to use mobile payments have moved forward in innovative mobile activity, like barcode payments not requiring NFC technology.
It’s important to keep in mind that while South Korea’s consumers scored high compared with other countries on the Index, the Consumer Readiness score was the lowest of the six components tracked on the MPRI . These updates from Korea demonstrate that activity in other areas could move the needle in consumer acceptance.