Two new payment systems may allow mobile phones to serve as payment gateways, leading potentially to a radical departure from Koreans’ reliance on credit cards as a payment system for retail and online purchases, according to that nation’s Financial Services Commission (FSC).
The first method generates a barcode on the phone screen when an account number and access code is typed. The barcode is then scanned by the cashier, causing the payment to be deducted from the user’s bank account.
The second method requires consumers first to register their bank account and access code with a web site. The seller punches the buyer’s phone number into an automated response system (ARS) device, prompting an automated call to the buyer’s phone to obtain authorization for the purchase. The advantage of this method is that it doesn’t require the buyer to have a smartphone.
“All the necessary technologies to run the new service are ready,” said an FSC official. “We hope it will be available after a related law is revised on Nov. 6.”
To minimize risk of losses through hacking or fraudulent uses of the system, the FSC may limit transactions to 300,000 won ($269). However, regulator are considering a request by e-commerce finance firms to set the cap at 500,000 won ($359).
Implementation of these new phone-based payment systems is expected to reduce the reliance on credit cards as a payment method and to force credit cards to lower transaction fees, according to the FSC.
“The fees for using the service may be lower than the 1.5 percent that credit card firms charge large discount stores because the operating costs are lower,” an industry source told JoongAng Ilbo. “It will also curb rampant spending because consumers can only spend what is in their account.”
Currently, transactions amounting to 41% of Korea’s per-capita GDP is conducted using credit cards. The comparable figure is only 15.2% in the US and 8.1 percent in Britain.