Value context and insight. lkm@koreatimes.co.kr
Competition heats up between card, tech firms over easy pay services
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By Lee Kyung-min
Competition is intensifying between card firms and big tech companies over simpler, faster pay services, accelerated by tech giants Naver and Kakao which have solidified their lead over traditional card issuers, market watchers said Sunday.
Easy-access, fintech-driven payment platforms deeply integrated in everyday life are redefining financial services, prompting closer strategic partnerships across the industry to better meet the growing needs of consumers prioritizing faster, easier services, as well as cash and mileage rewards.
According to a report by the Hana Institute of Finance on simple, easy-access payments in everyday life, tech firms now take up about half of Korea’s simple pay services market.
In contrast, the share of traditional financial services providers plunged to 26 percent last year, down from 57 percent in 2016.
Simple pay transactions per day averaged 954.5 billion won, equal to 30 percent of the country’s private consumption last year.
Among younger users, the report showed, 90 percent in the 20-39 age group have used the services.
The payment subsidiaries of Kakao and Naver have made continued efforts to enable consumers to pay, earn points and manage cash in their accounts in a simple, one-step action through an app.
They are strengthening partnerships with payment gateway service providers to better integrate point rewards, appealing to both users and merchants.
In response, card firms are launching new apps and expanding partnerships to regain their edge.
For example, Hyundai Card teamed up with Apple to provide Apple Pay service, seeking to lock in a greater number of young iPhone users.
The success is minimal, as measured by Apple Pay’s transaction volume standing at around 2 trillion won ($1.4 billion), compared to Hyundai Card’s annual transaction volume of 186 trillion won last year.
Still, transaction fees are emerging as a source of criticism.
According to the report, simple pay fees are far higher than those charged by traditional credit cards, especially to small merchants.
Traditional card companies charge lower than 0.4 percent to small businesses.
However, simple pay service providers charge 0.96 percent for card-tied transactions. Further complicating the market dynamics are stablecoins, the report added.
“The simple pay market ecosystem will be reorganized due to blockchain-based stablecoins,” the report said. “The digital currencies enable fast transactions, and are increasingly viewed as viable alternatives to traditional and app-based payment networks. We may have to brace for the rapid emergence of new market players that provide blockchain-driven payment models.”