Companies scramble to get ahead in mobile payment system race
Kakao Pay, run by Kakao, operator of the ubiquitous KakaoTalk mobile messenger, has attracted more than 10 million users since its launch in September 2014. Top telecom service provider SK Telecom announced on Wednesday that its T Pay saw the user count surpass 500,000 in just three months after its launch.
With a smartphone penetration rate of more than 90 percent, Korea’s retailers and tech firms - from device producers to telecom service operators and portal sites - have scrambled to come up with their own versions of a mobile payment system.
Mobile payments have become a particularly hot potato in the Korean tech scene recently, as companies have been vying to grab a slice of the growing fintech pie.
An April study by the Bank of Korea showed 58.6 percent of some 2,500 adults polled began making mobile payments last year. Mobile payments for shopping in the third quarter last year surged 58 percent from a year ago to 6.2 trillion won ($5.3 billion), the central bank said.
Another April survey of 327 adults ages 19 to 59 by DMC Media, a digital research laboratory, showed 47.1 percent of the respondents have made mobile payments at least once, up 10.6 percentage points from six months earlier.
“Mobile financial services have huge room for expansion in the number of users within a short period of time,” the Bank of Korea said in a report.
Although some 20 services classified as mobile payment systems are currently available, their fields of concentration and mechanisms vary.
For instance, users need to save their credit card information in advance to use Kakao Pay on certain websites or on mobile shopping apps. Kakao Pay also allows users to transfer cash. T Pay is linked to the SK Telecom’s subscriber account so that the subscriber can receive discounts. Payments are charged to the user’s phone bill instead of to a credit card.
Samsung Pay launched in August and has raked in the third-largest number of subscribers at five million - after Naver’s N Pay (16 million) and Kakao Pay - at a rapid pace on the back of the country’s most popular Galaxy phones. The payment system is available only on some of the latest Galaxy models and allows users to simply swipe on the phone to launch the app and hover the device over card readers to pay at restaurants and shopping malls.
“We don’t consider ourselves in direct competition against either N Pay or Samsung Pay, given we have different focuses and targets,” a Kakao spokesman said.
“We are in the middle of a Warring States period of mobile payments,” said an industry insider who asked not to be named. But he said the market is not that lucrative. Service operators receive commissions from credit card issuers that are smaller than 1 percent of the payment made.
The mobile payment market has an upbeat growth outlook, according to market researcher Gartner. The global market for mobile payments is forecast to more than quadruple from $163.1 billion in 2012 to $721.4 billion in 2017.
Data for Korea is not available.
BY SEO JI-EUN [email@example.com]