Apple Pay causes upheaval in Korea's payment market

The Korea Times

The Korea Times

Finance

Tue, September 26, 2023 | 08:35

Companies

Apple Pay causes upheaval in Korea's payment market

Posted : 2023-05-18 16:37

Updated : 2023-05-19 17:01

A customer uses their iPhone for an Apple Pay transaction at a restaurant in Seoul, March 21. Newsis

Naver Pay app downloads soar following Samsung Pay partnership

By Anna J. Park

The local payment service market is in upheaval, following Apple Pay's official launch in late March in partnership with Hyundai Card. While Apple Pay is permeating into local markets rapidly, other major payment services seek partnership strategies to hold onto their customers.

According to the payment industry, the number of newly issued tokens for Apple Pay is expected to have surpassed 3 million as of early this month. Tokens are issued to new users of Apple Pay, as a new subscriber's credit card information is encrypted. It has been less than two months since the mobile payment service's official launch in Korea on March 21.

Although Hyundai Card does not offer information on the real-time aggregated number of Apple Pay users, Chung Tae-young, the head of the card company, verified on April 11 on his Instagram posting that the number of Apple Pay tokens exceeded 2 million in the third week of Apple Pay's introduction in the country.

With the global mobile payment service gaining popularity, Hyundai Card is also benefiting. The number of newly issued Hyundai Cards stood at around 355,000 during the one-month period following Apple Pay's launch, a 156 percent hike from the same period last year.

Nearly 80 percent of new subscribers were either Generation Z or Millennials, with those in their 20s accounting for 51 percent of the subscribers and thirty-somethings taking up 28 percent. Those in their 40s accounted for 12 percent of the new subscribers during the first month of Apple Pay's launch.

What is also noteworthy is that 9 percent of transactions by Hyundai Card customers using Apple Pay are paid in overseas markets, as of the end of last month. This is more than four times the average of local card companies' overseas payment rate of 2 percent.

Promotional image of Naver Pay and Samsung Pay / Courtesy of Naver Financial

Aiming to retain loyal customers as well as to attract new users, Samsung Pay, which used to dominate local offline payment services with over 16 million users in Korea, has moved quickly to form a partnership with Naver Pay, the top online payment provider, which boasts over 31.5 million users in the country.

The partnership between the top payment companies from each offline and online spheres was first formed in late February, and the two firms started to link their services in late March, a week after Apple Pay's official launch in Korea.

The partnership allows customers to easily use Naver Pay at Samsung Pay-affiliated offline stores across the country by utilizing Samsung Pay's magnetic secure transmission (MST)-based contactless settlement. The number of Naver Pay application downloads soared to about 470,000 in April, a 186 percent increase compared to the previous month. Before the partnership, Naver Pay users could pay at offline stores only via QR code.

The monthly average amount of payment and settlement per customer also rose by 123 percent from the previous month. By age group, the amount that those in their 30s and 40s paid with the service rose by 206 percent and 219 percent, respectively, while people in their 20s also increased their payments with the service by 143 percent from the previous month.

A customer uses the Naver Pay app for a transaction at a Samsung Pay-affiliated store in Seoul. Courtesy of Naver Financial

While major players of the payment firms accelerate their strategic moves to grab customers' attention, some payment companies are facing an end to their services, as their performance falls behind.

Mirae Asset Pay, launched by Mirae Asset Securities, is slated to end its service by June 20. Despite the payment service's effort to increase its affiliated stores to over 20,000, the first payment service developed by a securities company will end its payment business in less than two years since launching in October 2021.

"The firm has been developing various financial services for customer convenience and investment activation. The firm has decided to deliver a new value, following changes in surroundings," an official from Mirae Asset Securities said.

LG Pay, launched by LG Electronics, is also slated to end its service by July 2024.

annajpark@koreatimes.co.kr