By Lee Youkyung
SEOUL, Aug. 10 (Yonhap) -- Capitalizing on the rising popularity of smartphones, South Korean mobile carriers are scurrying to bring their wireless technology and cellular networks to the financial sector in fresh efforts to overturn years of stagnant growth.
Cellular carriers are venturing into finance and credit card businesses that could eventually lead to transactions becoming as simple as scanning cell phones on an electronic reader. The move is also gaining traction as smartphone applications are being used to access bank accounts and receive personalized coupons and vouchers.
South Korea's top mobile carrier, SK Telecom Co., is doubling efforts to push ahead with mobile payment after it purchased a 49-percent stake in Hana Financial Group Inc.'s credit card unit for US$343 million early this year.
The joint venture, Hana SK Card Co., showcased a Touchseven card, a form of mobile credit card that uses the USIM on a cell phone and can simply be waved in front of an electronic reader for payment.
The company also rolled out a slew of services combining wireless technology with credit cards, such as the Smart Wallet that saves plastic membership cards on the phone and T Smart Pay, which customers can carry to a discount store to get discount coupons and make purchases.
"Among many convergence services between telecom and finance, mobile credit cards are what we see as the biggest possibility," said Jang Do-hyun, a manager at SK Telecom's commerce team by phone. "What customers carry around in their wallets -- credit cards, checking cards, membership cards -- they will all fit in your cell phone."
Telecom giant KT Corp., which trails SK Telecom in the wireless market, last month launched a trial service of a similar mobile payment system, Show Touch, in partnership with the country's leading credit card firm Shinhan Card Co. Show Touch also aims to eventually steer customers to ditch wallets for hand-held smartphones that carry all they need to go to a movie, buy groceries or eat in a restaurant.
The U.S.-based market researcher JuniperResearch forecasts that the mobile payment service market will explode from US$170 billion this year to $630 billion in 2014. Although mobile payment came belatedly compared with its neighbor Japan, South Korea has seen the fastest growth of the smartphone market, which is widely expected to surge to 5 million units this year, an increase of about 10-fold from last year.
But there are challenges for mobile payment to become a widespread form of payment. The number of retailers that have embraced the mobile payment system lags far behind the well-established networks of plastic card settlement, giving few incentives to customers to discard plastic cards and apply for a new mobile card.
Of retailers in South Korea that accept credit cards, only 1 percent of have adopted a mobile card payment system. For this reason, the initial response to mobile payment remains lukewarm, with Hana SK Card garnering some 20,000 customers for Touchseven as of May.
But the trend is inevitable, and the current move by the telecom industry is different from the past decade, when they dabbled in and withdrew mobile payment services after failing to lure users.
"Telecom companies tussled with financial companies in their previous attempts to venture into the finance industry," said Kim Nam-hoon, a researcher at Hana Institute of Finance. "But the emergence of smartphones has catalyzed the convergence move, and with faster-than-expected market growth, they see new markets opening up both in mobile payment and mobile commerce."
KT, the exclusive local contractor of Apple Inc.'s iPhone, said smartphones have turned the table so other sectors are now showing greater interest in partnering with telecom companies, its spokesman said.
Moreover, as smartphones become a more popular gateway for accessing the Web, business and commercial activities that rely on smartphones are predicted to spread as well.
"Mobile banking is the base of all commercial activities using mobile devices," said Hana Institute's Kim. "Overall, it is an inevitable trend that mobile finance and commercial activities will grow."
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