Where plastic meets money on mobile: South Korea big step in digital money

We follow digital convergence here at the Communities Dominate blog and digital money is another of those opportunities. Jim O'Reilly and I discussed how advanced South Korea was in this area, in one chapter out of our book Digital Korea in 2007. At that time we reported that all three mobile phone networks had enabled full mobile payments and for example five separate credit card services were enabled on the three networks and that the default setting for new credit cards in South Korea was to enable it to your mobile phone, with the traditional plastic card as the optional extra, sent to your home mailing address only if you wanted the plastic card as well.

But that was still the situation that is typical in most advanced countries of mobile money, such as Austria, Croatia and Slovenia; South Africa and the Philippines; the Scandinavian countries and Estonia; Japan; etc. The problem in those countries is that the system still had strongly entrenched parties, with the banks in one corner, the credit cards in another corner, and the mobile operators in a third corner and various other money industry players from contactless payment systems to online E-cash systems in yet another corner. So the typical consumer had tons of different devices, accounts, pin codes, etc.

That has now changed. The BBC had a story about the brand new national single identity digital money identity cards, as SIM (Subscriber Identity Module) cards for mobile phones, that now incorporate all the different banking systems and credit cards and mobile phone payments. There is one centralized clearing house for all payments this system handles, and the SIM card will allow users to set up their banking accounts, credit cards, make large-ticket purchases using a PIN code, and make small value purchases like paying for public transport or a can of soft drink, at the touch of the device to the payment terminal; and connect to the mobile network, all with the suitably equipped phone.

This is a very big step, as it is now "interconnectivity" between all major digital money interested parties in South Korea, and all through the obvious best digital device to do that - not a plastic credit/debit card with an intelligent chip, but of course the mobile phone, which allows far more security and utility to the user and to the system.

The South Korean solution was pushed hard by the government to convince the different parties to come together, and it is likely to turn the innovation into a great commercial success as well, as a more efficient solution for banking, credit cards, and payments (and mobile). The BBC reported that in one month the system has already spread so that over 100,000 people make transactions per day, and this is expected to rapidly spread to over half of the population, as the Korean consumers upgrade their handsets and SIM cards to this new facility. Interesting times. Lets see how that goes.

Comments

[Jean Fabio Baro]

That is all great stuff!!
Where could I get further information about the technologies involved?

Regards

[Mariana Oliveira]

You're right: some countries are much more advanced in mobile marketing. We say we're 4 years behind USA, 3 years behind Europe and 1 year behind USA. But we're running to make this work. Till now the results are great!

As you say "Lets see how that goes".

Cheers

[Giff Gfroerer]

Tomi,

Nice concept. However, can you imagine the time and effort this would take in the United States? Getting the banks, credit card companies and the carriers all on one page? Sure, it needs to happen. Sure, it is progress for the consumer. And no doubt it brings all of the entities together to share in the profits...

But here in the U.S. all the three see is how THEY are going to make money. This will prevent the above scenario for the foreseeable future.

My prediction would be that one carrier (most likely a Verizon or ATT), gets together with possibly one credit card company (VISA), and then one of their signature banks (like Chase) to bring this out in 2011. Once others see this the race will be on to sign partnerships...

But having one clearing house? I hope this happens...I just don't know how they get through all the red tape and egos to make it happen...

My best as always,
Giff

[Tomi T Ahonen]

Hi Jean, Mariana and Giff

Thank you for the comments. I'll respond to each individually

Jean - I really don't have more info right now, not even a web link, as that was a CNN story I caught off TV when I was not home. But I'm sure you can Google South Korea and credit cards and mobile and the stories from the last month should be strongly related to this.

Mariana - I think there was a typo on your posting (or else its a funny joke), with you behind the USA both 4 years and one year. You were from Brazil I recall. You probably meant 4 years behind Japan or South Korea.. Yeah, thats about right. Also, the USA is moving faster than most, and certainly catching up to mainstream Europe now in mobile.

Giff - nice to hear from you again and great comments. Yeah, this would take a lot of compromise and true national leadership for some countries to get it done. Likely to be smaller countries with more friendly players accustomed to cooperation to do it next, not the USA, where the bizarre inter-state commerce laws make it so strange to have few national banks, and many mobile operators who are local or regional etc.

I think Scandinavian countries will move on this kind of trajectory soon as well. There is a long history of banking inter-operability across borders even and they were among the first countries to introduce banking cards (charge cards/debit cards/ATM cards) and obviously the first internationally roaming mobile networks, etc. Also with relatively few major players (Norway has only two actual network operators for example) and major Scandinavian cross-ownership with banks etc, this could happen there "relatively easily" (perhaps)..

But yes, the USA, it will be a long drawn-out fight, with probably many intermediary steps along the way, alliances etc.

But how long until this is "obvious" to end-users and they start to expect it, to demand it (and complain that it works in other countries...)

It'll come. But not in 2009, ha-ha..

Thank you all for writing

Tomi Ahonen :-)

[Jeff Paul Scam]

Hi, I found your post really interesting, my friend and I run a small internet marketing business at home. We are roommates, so after our day job, we spend an hour on research and work.