Apple Pay completes launch in South Korea

After numerous setbacks with the Korean Communications Commission (KCC), linked to the monopolistic position of its in-app payment system, Apple is returning to South Korea through its mobile payment application Apple Pay. The financial regulator in the South Korean territory revealed that the launch clause was being reviewed.

FACTS

• Apple Pay is to enter the South Korean market through Hyundai Card, a subsidiary of the Hyundai Motor Group. Apple has reportedly signed a one-year exclusivity agreement with the Seoul-based financial company.

• During this period, only people with a Hyundai Card will be able to use Apple Pay.

• Apple's iOS system has a 31% market share in the country.

• South Korea will be the eleventh country in Asia-Pacific to support Apple's wallet and digital payment service. The Cupertino-based company already operates its payment services in Australia, China, Hong Kong, Macau, Taiwan, Japan, Singapore, Kazakhstan, Malaysia and New Zealand.

CHALLENGES

• Integrating one of the most advanced markets for digital payments: South Korea, one of the fastest growing countries in the world for digital services, but currently untapped by the major technology platforms Apple and Google. According to a Statista study, in 2019, only 17.4% of transactions were conducted in cash in the territory.

• Meeting a competitive challenge... South Korea is also home to one of the world's largest Android device manufacturers, Samsung. And digital payment systems are already widely adopted in South Korea with services such as Naver Pay, Kakao Pay and Samsung Pay.

• ... and technology: Apple uses Near Field Communication (NFC) with Apple Pay for contactless payments, while the majority of Korean businesses use Magnetic Stripe Transmission (MST). The two technologies are similar, but they are not interoperable. As a result, only 10% of South Korea's 2.9 million shops can use cards with an NFC protocol, drastically reducing the usefulness of Apple Pay in the country.

MARKET PERSPECTIVE

• The global volume of payments made on the Apple Pay platform has surpassed that of the major international schemes. However, this is cumulative, as Apple Pay also makes payments using these schemes.

• Last month the Korean payment service KakaoPay suffered a massive outage after a fire destroyed a data centre hosting Kakao's services.  The super app has 47.5 million users in South Korea, equivalent to 90% of the population. Like WhatsApp in China, Kakao is first and foremost an instant messenger, but also an online payment system, a way to take a taxi or public transport, to validate one's identity on certain sites, to play games...

• After the ruling aimed at forcing Apple to open its App store to other payment methods than proprietary solutions (a ruling also aimed at Google), the American firm is once again in the firing line. The billing policy resulted in Korean app developers paying a 33% commission rate, while their foreign counterparts only paid 30%.