South Korea plans to introduce various initiatives to implement cashless economy

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South Korea’s Financial Services Commission (FSC) and Bank of Korea (BoK) have taken two different approaches to turn country’s economy cashless. FSC has plans to introduce palm vein authentication technology for POS payments during first half of 2017. This technology will facilitate payment without the need of a physical card, mobile phones or any other special hardware. This initiative is a part of biometric authentication system which will be introduced on pilot basis in association with card companies and is called BioPay. FSC is planning a naked payments system to be introduced in the country this year. In Q4 2015, FSC first announced plans to develop standards for biometric identification as a proposal to promote digital transactions.

BoK has stated that Committee on Financial Informatization Promotion (CFIP) is already working on developing technical standards for such services which will later be put on trial with domestic commercial banks. Fingerprint identification technology is already being used by some banks but the adoption is rather limited due to higher costs. Hence focus is shifting towards vein and iris recognition.

As a part of cashless economy scheme, another initiative Coinless Society Project (PDF) has been taken up by BoK. Under this scheme, customers will be provided change in the form of top up in prepaid cards instead of coins. This scheme is a part of structured digital payment infrastructure and no additional fees is associated with this service. Under this system, the retailer will add an amount equivalent of physical change to customer prepaid card for any purchase through a top up terminal. The subsequent settlement will occur between store franchise operator and prepaid card issuer.

Coins add to the social cost of circulating and managing physical change. With this approach of change to be returned as top up in prepaid card account, it contributes positively towards cost reduction effort of South Korea. This coupled with addition of palm vein technology can be considered a positive approach towards cashless economy of South Korea.

The prepaid card market in Gross Dollar Value terms increased at a CAGR of 17.2% during 2012-2016. Over the forecast period of 2017 to 2021, the category is expected to record a CAGR of 11.6%, increasing from US$ 11,756.8 million in 2017 to reach US$ 18,231.6 million by 2021.

To know more and gain deeper understanding of prepaid card industry in South Korea, click here.