Digital wallets open in Korea to great success
A 22-year-old college student named Lee Chae-young recently went out with friends and spent 88,000 won ($77.51). They were to split the bill among the four of them, but none had 22,000 won in cash. So Lee paid the bill with her credit card and told her friends to “toss” her the 22,000 won that each owed her, which they did by accessing the money transaction app Toss on their smartphone.
Since the beginning of the year, such digital wallets have been gaining popularity among consumers in their 20s and 30s as fewer people, especially college students, are carrying cash or cards since student IDs can also be used as credit, debit or public transportation cards. Furthermore, cost-sharing is becoming a more common practice.
“It’s been a long time since I’ve carried cash around with me and the same is true for most of my friends,” said Song Jun-sun, a 23-year-old college student. Song said sending money through Toss has become customary among his peers, especially when there’s a large group of friends.
Toss, developed by the Seoul-headquartered fintech startup Viva Republica, was voted brand of the year by Korea Customers Council in July, and has accumulated over 4 million users since its launch in February 2015.
Without having to confirm their bank security numbers or certification, users can connect to their bank accounts with their phones using no more than a simple verification process and a phone call. Transactions can also be made without knowing the correspondent’s bank account number, as long as the user knows the phone number or Kakao ID of the recipient.
But the real secret to its popularity lies in the convenience of the app on the receiver’s end. Unlike the other apps that require both parties to have downloaded the same app, Toss allows someone without the program to receive money.
So even a non-user can still get money that has been tossed to them, just by clicking on the message Toss sends them and inputting their bank account number. The company has also added a new function as of September that allows users to manage up to 17 bank accounts on the same device, something unavailable on other similar apps.
Currently, the first five transactions are free when made directly to another bank account, after which the app charges 500 won per transfer. Sending money to someone using only their phone number or Kakao ID is completely free, because the money moves only within the application’s platform, and users can send up to 500,000 won per day, but may not exceed 5 million won in a month.
“The app is running almost empty-handedly since our current goal is to secure as many users as possible,” explained Ahn Ji-young, chief of communications at Toss. “We’re planning to expand to other financial operations like loans and currency exchanges in the future. We hope to keep extending our services to attract more users.”
As of August, Toss had reached an aggregate transaction volume of one trillion won, the first domestic digital wallet to do so.
Another major player in the fintech game is Kakao Pay, followed by Bank Wallet Kakao, both developed by Kakao in 2014. The two pioneering apps function in a similar way: users can pay for something online by connecting their bank account and charging Kakao money.
Although both provide users with convenient verification procedures, people weren’t so eager to abandon the online services provided by major banks since wiring was only possible between people if both the sender and receiver had downloaded the app. Kakako Pay has started a handy money-wiring service in April that allows users to send money instantly through chat rooms.
Its service range is expected to extend once the company launches the internet-based Kakao Bank next year, for which Bank Wallet Kakao will end its service by this year’s end.
Unlike in Korea, digital wallets have been common in the United States for some time now. Popular online payment services there include PayPal and digital wallets such as Venmo, Google Wallet and Square Cash and Venmo. PayPal has the greatest number of users, with 13.1 million just in the Asia-Pacific region alone, largely because it was the first of its kind and offers quick payment on many online shopping sites.
Google Wallet lets users attach payments with emails, while Square Cash allows the largest transfers - up to $10,000. But the one getting the most attention in the States right now is Venmo, which pays no charge on remittances and does not require the receiver’s bank account number. The easy connection via Facebook and the simple verification process have helped the wallet’s popularity. “Just Venmo me” is now a common phrase in the United States.
Transactions made via smartphones are rising steadily, with the average number of mobile remittances per day for the second quarter of 2016 reaching 52.72 million, taking up 61.3 percent of the all internet transfers. The percentage, which went up by 2 percentage points compared to the first quarter of the year, is expected to keep increasing along with the growing fintech market, especially since the government launched the world’s first open fintech platform in August.
“Every financial transaction available on the internet will be possible via the smartphone soon,” explained Jung Yoo-shin, a business professor at Sogang University and also the chairman of the Fintech Center. “Mobile phones have become a part of our bodies, with no limit in time or space. The potential for mobile phones will overtake computer-based transactions in the near future, should the apps overcome the security risks and create more innovative ideas.”
BY YOON SO-YEON [firstname.lastname@example.org]