South Korea’s payment cards market is one of the most competitive and attractive in the Asia Pacific region. It is mature and over-served, with credit and debit card penetration rates of 1.8 and 3.0 respectively per inhabitant in 2014. However, is this appealing market set to remain that way in the near future?
In terms of transaction value and volume, South Korea’s payment cards accounted for 6.0% and 17.0% shares respectively in Asia-Pacific in 2014.
Go deeper with GlobalData
M-payments gaining traction in South Korea
Between 2010 and 2014, the South Korean cards and payments industry moved towards mobile technology, as telecoms companies moved into payments. M-payments using near-field communication (NFC) are gaining popularity among Korean consumers. This demonstrates the convergence of mobile and traditional card-based payments, and signals the rising dominance of telecoms companies in payments.
Non-banking card issuers such as Hyundai Card and Lotte Card could lose market share to both telecoms companies and banks. To capitalise on the growing m-payments market, non-banking card issuer Samsung Card is anticipated to launch Samsung Pay m-payments in the second half of 2015.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataSouth Korean government looking to rein in credit card spending
The number of credit cards in circulation fell over the past five years. The number of credit cards issued in South Korea fell in 2012 for the first time since 2008, due to the prolonged economic slowdown and government regulations to curb overuse of credit cards and control household debt.
An increase in household debt has prompted the government to introduce measures to discourage credit card spending, reducing tax deductions on credit card transactions and increasing them for debit cards. A tax reform bill in 2012, increased tax deductions on debit card spending from 20% to 30%, while for credit cards it was reduced from 20% to 15%.
In April 2013, the government introduced new rules for closure and automatic cancellation of dormant card accounts. These factors, in tandem with security concerns raised by leakages of credit card customer data, are anticipated to further decrease the number of credit cards in circulation between 2015 and 2019.
Data security breaches dampen the credit cards market
In January 2014, the FSS announced that the information of 20 million credit card users had been stolen by a temporary employee of personal credit ratings firm Korea Credit Bureau. In a separate incident on April 11, 2014, the FSS announced that hackers had stolen the personal data of 200,000 credit card users, using some to produce counterfeit cards and make fraudulent payments of $113,859.60 (KRW120m).
As a result, the regulator ordered all credit card issuers to upgrade fraud-detection systems to prevent similar data thefts. However, the incidents became a major issue in the country, and this is anticipated to affect the credit cards market over the next five years.
Digital gift cards to drive the prepaid cards market
Digital gift cards are seen as a key driver of prepaid gift cards. In South Korea, cash gifts are common for holiday periods, such as weddings or birth celebrations, and are generally viewed as an attractive alternative to cash. Prepaid gift cards are widely used as gifts for both individual and business users, and digital gift cards are a key driver of the prepaid gift card market in South Korea.
Korean retailer Home Plus introduced digital gift cards in association with HID Global in 2010, which allowed customers to customise cards by adding text messages and company logos. Store staff were given intensive training to assist customers with issuance of online cards. Digital gift cards have remained popular and are expected to be a key driver for prepaid cards over the next five years.
Another example of a prepaid card is the Korea Pass card. Launched by the Korea Tourism Organization, it is aimed at foreign tourists to Korea, allowing them to load up to $456.7 onto the card for use on subways in various cities, accommodation, and entrance fees to popular destinations. It is a variation of a product that Koreans are already familiar with.
The well-known contactless T-Money card is used on transport networks around the country and also in stores, and is issued by the South Korea transport authority. It permits swift reloading of credit through automatic recharging machines at subway stations, and also at convenience stores for less than $1.40.
