Easy mobile payments become $10 billion businessMobile payment systems such as Toss and Kakao Pay have grown exponentially and now process more than 12 trillion won ($10.6 billion) in purchases a year. The market is expected to at least double in size this year.
According to the Financial Supervisory Service (FSS), payments via mobile device last year increased from 2.44 trillion won in 2016 to 11.95 trillion won, a 390 percent increase.
Over 236 million such payments were made last year, a 362 percent surge compared to 51 million in 2016.
The FSS estimates that number to grow to 27.87 trillion won by the end of this year. As of the end of May, mobile payments have already reached 11.61 trillion won for 2018.
One of the reasons such payments are so popular in Korea is because a customer doesn’t have to go through complicated security authentication systems, including the one-time passwords (OTP) required in other online payments.
Payments can be made instantly, even through social media.
As of May, there were over nine million people using mobile payment apps by seven companies including IT giants like the nation’s leading mobile messenger app developer, Kakao, and the country’s largest web portal, Naver. The FSS report showed that 51.7 percent of the users are male.
The dominant age group using the payment apps are people in their 20s and 30s who account for 78.1 percent. People in their 20s account for 58.1 percent while those in their 30s account for 20 percent.
The market is dominated by two companies - Viva Republica, which developed Toss, and Kakao’s Kakao Pay. Together, these two companies have a market share of 96.4 percent or 11.19 trillion won.
The number of people using either Toss or Kakao Pay amounts to over 8.65 million or 95.3 percent of the total.
The FSS report said that despite its rapid growth, the industry is structured in a way that creates more losses as the size of transactions grow.
Currently, almost all of the companies transfer money with no charge to customers, but they have to pay banks between 150 won and 450 won for each transaction.
The companies are forced to find profits in connecting customers with other financial services, such as fund investments, real estate investments and P2P payments.
“It seems the purpose of easy payment services is not to make a profit but rather to secure a number of customers through that service and then connect them to financial platforms and introduce new financial products,” the FSS report said.
BY LEE HO-JEONG [firstname.lastname@example.org]