Alipay Entering into South Korean Market

During the Lunar New Year, more than 100,000 Chinese visited South Korea. The way people shop in a duty free shop, or in a convenience store is quite different than before: They pay with the world’s well-known Chinese mobile payment, Alipay, the most successful case of Fintech in the world. In Seoul main streets and on Korean internet sites, we can easily find advertisements of Alipay. China UnionPay already entered into the South Korean market, and even a brand of my credit card issued in South Korea is UnionPay. They partner with BC Card, South Korea’s card issuer and they have been expanding their business in South Korea. China’s payment has entered into South Korean market in earnest and South Korean players have been getting into the game. T-money, the largest prepaid card player in South Korea and Hana Bank, the fourth largest bank in South Korea partnered with Alipay. As an example, Chinese tourists in South Korea can pay back to Alipay’s account after using T-money for foreigners if they have any remaining credits. T-money is available not only transportation including metro, bus and taxi but also for payments at convenience stores and other selected shops. Also, T-money has introduced a new service for domestic users, providing compensation system for Mobile T-money when a user loses a phone, providing a safer environment for T-money users. For Hana Bank, they haven’t started a service with Alipay but it will be launched soon. After launching a new service with Alipay, Chinese tourists will be able to pay with Alipay at merchants of Hana Bank. In other words, they can use Alipay in broader places like orthopaedics, nail salon and hair salon than what T-money service offers. The similar case has been seen in South Korea and Japan. Cashbee, South Korea’s mobile payment card partnered with Japan’s three major MNOs, NTT DoCoMo, KDDI and Softbank. Japanese tourists can now pay with their smartphone in South Korea after installing a dedicated application. A wave of Fintech has come to Korea. The country is attempting a different approach with the use of Fintech. Some players already recognized their current approach is not acceptable anymore hence it is the time to shift their strategy for future growth. Payments area has been getting global and more attractive for users. For example, Alipay gives 4.5% interest when a user deposits money. Yes, it’s attractive. However, players should evaluate what is important for their future growth without tapping into the current trend. Establishing an initiative for business growth should be the overriding concern now amid mounting attention to Fintech.


先週、サムスンがスマートフォン決済ソリューションベンダーであるループペイを買収したとの報道があった。今回の買収は今後のサムスン製スマートフォンの更なる飛躍を意味するものになるのかが注目されている。 ループペイの技術の長所は汎用性であり、既存の磁気式カードリーダーにスマートフォンをかざすことで決済が遂行される。既存のスマホ決済は専用端末機を要するケースが多く、アップルペイも然りだ。 しかし、サムスンが今回導入したスマホ決済技術は専用端末機の導入は必要としない。加盟店は端末機のための追加コストがかからないため、導入に積極的な姿勢を見せるだろう。既存のスマホ決済にはなかった、汎用性・互換性を備えているループペイ社の技術は今後、サムスン製スマホの更なる成長を牽引する要因のひとつになるだろう。

Samsung’s acquisition of smartphone payment solution vendor LoopPay

Last week, Samsung announced the acquisition of LoopPay, a US-based smartphone payment solution vendor. It has been receiving attention as it may be poised to bring further growth to Samsung’s smartphone. The strength of LoopPay technology is broad versatility. Its technology enables smartphone payment at a touch to a magnetic card reader. Most existing smartphone payment services require the implementation of a dedicated payment terminal, and ApplePay is not an exception. However, dedicated terminals will now not be required with Samsung’s smartphone payment technology. The fact that a merchant will not incur additional cost for a payment terminal makes this smartphone payment service more attractive. The LoopPay technology with its versatility and compatibility should become one of the future growth drivers for Samsung smartphone.

E-money in Japan and South Korea

Japan and South Korea are among the leading countries which have tried to spread the use of e-money from an early stage. Due to the different backgrounds they have, they have been going the separate paths for e-money growth. In recent years, the Japanese e-money market has emerged as one of the important payment methods. Especially with the consumption tax rise from April 2014, the e-money market has received more attention because the usage of loose coins would increase due to the consumption tax rise from 5% to 8%. On the other hand, in South Korea, the e-money market growth has been sluggish because of the heavy usage of credit cards and check cards. Although there are two major e-money providers, T-money and Cashbee, South Korean credit cards and check cards are available for not only big purchases but also for small purchases so consumers do not recognize the need for e-money. In Japan, Suica, e-money from East Japan Railway Company and nanaco, e-money from Seven & I Holdings, exceeded 100 million transactions for a month in March 2014. It is the first time for nanaco to exceed 100 million transactions. All e-money providers have said that transaction volume has been growing. Celent believes that this trend will continue in the future by improving customer experience although one of the obstacles in the way of the e-money market growth has been considered the lack of the customer experience. In South Korea, Kakao Talk, one of the most popular social networking services in South Korea announced that they will launch a mobile wallet service called “Bank Wallet Kakao” in the first half of this year. At the very beginning, this will be used for customer to customer (C2C) payment and will expand to business to customer (B2C) payment. For both countries, the e-money market has entered a new phase although the reasons for growth are different. From the case studies of both countries, we can learn that e-money has diverse potential. I believe that e-money will create a new value and become a more accepted payment method.

CARTES Asia: A new payment industrial revolution in SoLoMo era

For participation in the ceremony of the award, where I was honoured to be a member of the jury, and presentation in the conference, last week, I visited Hong Kong. The venue, Hong Kong Convention & Exhibition Centre is vibrant as always. There were three big events around the same time.

The event, CARTES Asia is the leading smart technologies event in Asia Pacific. CARTES Asia has brought together innovative solution providers and market leaders from the card manufacturing, payment, security, identification and mobility industries. Some 3,000+ visitors in the banking, telecom, transportation and security sectors have a unique opportunity, not only to discover international exhibitors’ innovative technologies, but also to enhance their knowledge through the conferences and round-tables, which present the latest trends. I gave a presentation for the Cards & Payments session entitled "Payment Systems Trends in Japan."

The Asian SESAMES Awards aim to reward the most innovative technological applications developed for the Asian Pacific market in the field of smart cards, digital security, identification, secure transactions, and contactless technology. The Awards reward the best projects in 3 categories: Advanced Payment and Mobile Money; Card manufacturing & Personalization; and Secure Identity. As a juror, I evaluated the submissions independently and impartially.

Through the examination of this award, innovation, was proved to happen in places where new markets and new technology meet. Award winners all developed the frontiers of both technology and market. And the priority in technology and market was SoLoMo (Social, Local, and Mobile) once again. We are in the midst of ongoing technological changes and evolution, i.e. a new payment industrial revolution in this SoLoMo era.

About CARTES Asia:


Is a New Era for Japan’s Mobile Wallet Coming?

KDDI, a Japan’s mobile carrier, announced that they will launch “au Wallet”, mobile wallet which has both e-money and point reward program, in the coming May 2014. This mobile wallet is available for not only online shopping but also offline shopping at more than 30 million merchants. KDDI has pushed forward 3M strategy – multi-use, multi-network and multi-device a couple of years ago. As a part of that, they are launching new O2O (online-to-offline) payment service. “au Wallet” can be accessed from both PC and mobile devices and will used MasterCard prepaid payment system for their payment processes. Also, they have a unique function for point program. When customers use this mobile wallet, rewarding points will be saved up and customers can use reserved points for their mobile bill payments. KDDI has some 34 million customers as of February 2014 and based on the customer base, they are targeted to create US$ 12 billion O2O market by 2016. Also, they will utilize big data analysis to improve the service. p_besshi_01 Source: KDDI KDDI starts this service with a solid customer base and a significant number of acceptances. However, it might be difficult to meet the goal they are aimed at because it might take time to influence customer behaviours. In Japan, mobile payment has existed since before smartphones spread but Japan has not achieved great success in mobile payment. However, the situation surrounding mobile wallet has been changing little by little. In Japan, the number of smartphone users has been increasing steadily and smartphones spread at a certain extent and the number of e-money users has been growing firmly. Therefore, au Wallet has a enough potential to success in O2O market. To lead this service toward success, KDDI should be sensitive to customer behaviours and try to add new twists continuously to their mobile wallet service with their CRM analysis.

App Card Makes Payment Easier

In 2013, South Korean payment industry entered a significant phase of payment. It is the introduction of App Card. App Card is the smartphone application which takes the place of plastic credit card and is used for both online and offline payment. In September 2013, six South Korean card companies including Shinhan Card, KB Card, Lotte Card, Hyundai Card, Samsung Card and NH Card collectively launched App Card. By the introduction of App Card, the process of smartphone shopping was streamlined. Previously, when a customer purchase something on smartphone with a credit card, they had to enter the credit card number every payment and PIN number and public key certificate were also required. The public key certificate should have been copied from the computer when a customer uses a credit card for smartphone payment at the first use. However, by using App Card, they can use smartphone payment with only six-digit PIN number after downloading the application and storing the credit card number to get started. Users don’t need to enter the credit card number on a smartphone every single payment. Capture1 This enhancement has been enjoying high popularity. For the first two months after the launch, the number of App Card users tapped 900 thousands and reached 3 million only for four months. Celent estimates that this growth will continue in 2014, albeit turning a little slower pace. Capture Source: SBS This service cannot be used at a number of offline shops at the current moment but the number of acceptance of App Card is expected to expand in 2014. The growth of offline acceptance will bring swifter growth for App Card.

On Innovation

Celent held our most recent Innovation event in Singapore the last week of November, following similar events in New York, Boston, Toronto, Tokyo, London, and, most recently, San Francisco. Most of Celent’s work is focused on specific financial industry verticals, but Innovation is a topic that transcends industry barriers, and so—by design—do many of our Innovation events.

In Singapore we had representation from the entire financial services spectrum—banks, credit cards, insurers, capital markets firms and exchanges. We presented some of Celent’s recent thinking on innovation, much of it from our new innovation survey. But the main event was a peer discussion between the participants themselves.

It was one of the more lively discussions I’ve seen. We set aside two hours for the peer discussion, and it went by in a flash. Participants jostled to get their say in, and the session ended with the feeling that it could have gone several hours more. I think one of the keys was that there were a lot of different types in the room: the abovementioned full spectrum of FIs, from both the business and IT side, and even from compliance.

Everyone was naturally interested in how their “colleagues across the aisles” looked at innovation, how far each had come in achieving it, and what their technology, operational and cultural approaches were—or were not. Participants brimmed with on-the-spot case studies of initiatives at their firms. This was also refreshingly unusual, since firms are often reticent to divulge competitive information and “secret sauces.”

I think the reason for this relatively high level of enthusiasm lies in the industry’s realization that innovation is crucial to long-term success–and considering the rapidly expanding number of disintermediators, and the remarkable success of some of them, maybe even needed for short-term survival.

Is Mobile Payments Market in Japan Growing Or Not?

People think that Japan is one of the countries that is an early adopter of contactless mobile payments. We can certainly agree this is true. However, whether contactless mobile payments are common in Japan is another question. The answer is in fact “No”. In other words, mobile payment-enabled phones are widespread because many mobile phones are preloaded with the mobile payment function, but the active users are far less than the penetration of mobile payment enabled phones. As of August 2012, there are approximately 126 million mobile phone contracts in Japan. Among those, 58% or roughly 73 million mobile phones are embedded with a mobile payment chip. This is equivalent to 20% of all e-money cards / devices, which total about 180 million cards. How is the transaction volume? Monthly transaction volume of e-money, including not only mobile payments but plastic e-money, recorded 260 million in July 2012. That is, monthly transaction volume per card is only 1.5 transactions. Recently, smartphone subscriptions have been rapidly increasing and mobile payment embedded smartphones have also gradually penetrated. Approximately 34% or 10 million of smartphones have mobile payment chips, and of these 3 million subscribers use the mobile payment function. Does this seem like a high number? Smartphone users usually tend to prefer new things compared to feature phones users but merely 30% of mobile payment embedded mobile phone subscribers use mobile payments. Given the low transaction volume of all e-money cards, mobile payment registered users don’t seem to use mobile payment actively at this moment. It could be because of the lack of recognition of mobile payment or simply the lack of allure and advantage of mobile payment. That is why Celent estimates that the active users of mobile payment are 10% or less of mobile payments holders. A number of overseas media believe that mobile payments are very popular in Japan. However, it is not true. Yes, the infrastructure of mobile payments has been established well but the active users are not so many yet. To increase the number of active users, mobile payments players in Japan should not only preload mobile payment functions in mobile phones but also develop a strategy for promoting mobile payment effectively.

Digital Wallet? But Real!

Hana Bank, well-known for being a smartphone banking pioneer in South Korea, launched a new digital wallet service called Hana N Wallet earlier this month. Hana N Wallet offers some new functionalities such as: • Convenient money transfer without account number and troublesome public certificate key which Korean regulator requires to online financial trading users in South Korea. Hana N Wallet 1 (P2P Money transfer) • Cash Withdrawal at ATM with six digits after receiving SMS when someone sends money to the other. Hana N Wallet 3 (ATM Withdrawal) Hana N Wallet is designed for use with a smartphone. When consumer A sends money to consumer B through consumer B’s phone number, consumer B receives an SMS and a “cash nut” payment into person B’s Hana N Wallet. What if person B doesn’t have Hana N Wallet in her/his smartphone? Just download it through the URL in the SMS! The “cash nut” can be withdrawn at any Hana Bank ATM, without an ATM card. This is done by entering a six-digit number provided by Hana N Wallet. People can use Hana N Wallet if they don’t have a Hana Bank account. Celent thinks that this service can attract potential customers and should lead to an increase in customer count. Celent believes Hana N Wallet could bring a significant change for not only the Korean banking industry but the Korean payments market. If other banks launch similar services in the near future, the Korean digital wallet market will be more buoyed. Hana Bank will launch other new services in a couple of months. Let’s wait and see how things go…