Card firms and carriers vie for mobile payments

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Card firms and carriers vie for mobile payments

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Kang Young-bin, a Seoul office worker, left her wallet at home when she went out to celebrate her 30th birthday with friends earlier this month.

But Kang did not fret since she could use a mobile credit card service on her smartphone to pay for everything.

Using her mobile phone, she picked a restaurant from a restaurant ranking app, paid for the meal, and even got a 20 percent discount by showing her membership card, which was displayed on her smartphone.

“It’s convenient because you can store not only credit cards but membership cards for discounts on your mobile phone,” Kang said.

“Plastic cards might soon go the way of paper bankbooks and gradually disappear from common use.”

Those sentiments are shared by the Korean credit card industry, which believes that mobile payments are the next growth engine for the maturing sector.

Now with both card firms and mobile service providers competing to lead the nascent market, observers are wondering if the merging of the card and telecommunications industries could spark a second boom era for the card industry.

For local credit card firms, the fact that mobile payment will be the driving force for the sector’s future growth is almost taken for granted.

“Credit card companies will enter the mobile payment market sooner or later, because that’s where the direction of the industry is inevitably going,” said an official of KB Kookmin Card.

“The only variable is the timing, as establishing the payment infrastructure, such as distributing charging equipment that can read mobile phones, will take time and a considerable amount of money.”

Meanwhile, telecommunications firms are already lining up to pounce on the burgeoning market.

SK Telecom, Korea’s largest mobile service provider, broke ground in 2009 by setting up joint venture Hana SK Card with Hana Financial Group to corner the market early.

KT, the nation’s No. 2 mobile service provider, followed suit by acquiring a majority share of BC Card last month and the card firm underwent a leadership change with former head of KT Capital Lee Jong-ho becoming its new CEO yesterday.

BC Card is expected to actively pursue the mobile card market as part of KT’s strategy of mobile convergence.

“[BC Card] will actively seek items that create synergy through the merging of telecommunications and credit card businesses and play a leading role as a processing firm within the mobile card market,” Lee said in his inaugural speech.

For ambitious telecommunications firms, opportunity seems ripe. Although people like Kang are still a minority among the 10 million smartphone users in Korea, their numbers are growing every day.

Hana SK Card, which began mobile payment services in March 2010 with its mobile card Touch 7, has seen the number of mobile cards grow from only 61 during the first month to nearly 74,000 last month.

However, the enthusiasm of mobile carriers is worrying financial firms.

The former president of Kookmin Bank, Kim Jung-tae, was quoted as saying that “telecommunications firms are the most terrifying competitors.”

This is because telecommunications and credit card industries, though seemingly unrelated, have striking similarities that make large telecom firms formidable opponents.

Telecommunications and credit card businesses both require national or global networks for either payment and communication as well as overlapping customer databases.

Moreover, telecommunications firms trump card firms in customer numbers, with SK Telecom’s 25 million customers far outweighing the 17 million customers of Shinhan Card, the nation’s leading card firm.

But analysts worry that the convergence between the two sectors could create an excessive credit boom.


By Rah Hyun-cheol, Lee Jung-yoon [joyce@joongang.co.kr]
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