Simple payment services are springing up like mushrooms. Although the market is in a nascent stage, numerous companies are scrambling to launch simple payment services. Therefore, some industry watchers say that customers should carefully choose which service they will use according to their life patterns.
Also, the companies who want to tap into the simplified mobile payment service market need strategies to secure versatility. If they compete indiscriminately even from the early stage of the market, the service market could become “a league of their own.”
Others say that the domestic simple payment service market will have a great potential for growth due to fierce competition. However, there is also concern that all domestic companies will struggle due to the competition between one another if global giants make inroads into the domestic market in earnest.
According to industry sources on Aug. 2, the domestic market has already developed. Even though the mobile payment service market is in the initial stage, the competition between service providers are already overheated. Various services are competing in the market, including SK Planet’s Syrup Pay, Shinsegae Group’s SSG Pay, NHN Entertainment’s PAYCO, and LG Uplus’ Paynow, as well as Korean internet giant Naver’s Naver Pay and Daum Kakao’s Kakao Pay.
In Sept., Samsung is going to launch Samsung Pay. Also, Chinese e-commerce giant Alibaba is determined to enter the Korean mobile payment market.
The market is not mature yet, but the companies now have a lot to think about, due to an increasing number of participating companies.
An industry expert said, “As more and more companies are joining the simplified mobile payment market, competition also becomes strong. Rather than just a functional change that shifts functions of plastic cards into smartphones, service providers need to create new services that can make consumers use the mobile payment services instead of plastic cards, which are more familiar with them.”
In order to do so, the firms also need to recognize when consumers need the simple payment services, along with numerous affiliated shops and stores and technology.
NHN Entertainment’s PAYCO allows users to simply make online or offline payments with their smartphones even if they are turned off, without downloading the application. NFC, or near field communication, technology is used that enables users to make offline transactions with just a tap. The company has secured 100,000 online and offline stores each, and is planning to expand even more.
The Shinsegae Group has become the first Korean retailer to release its mobile integrated payment system called "SSG Pay," that allows users to make online and offline payments. After the company figured out that major mobile payment service providers had some limits to increase the number of users and partner stores, it combined the simplified payment service system with its strong distribution channel, including 21 million Shinsegae Point members, Shinsegae Department Store, and E-mart. SSG Pay can be used by downloading the SSG Pay application and charging it with the e-currency SSG money, which is converted from cash or a gift card, or using a credit card registered in the SSG Pay account. With the service, Shinsegae has improved customer convenience.
Samsung Pay, which is scheduled to start the service in Sept., has cooperated with six domestic credit card companies and drawn major credit cards into smartphones. Also, there is an additional feature supported by Samsung Pay, called magnetic strip technologies (MST). These magnetic strip technologies are present in most payment terminals already, meaning that participating merchants will not have to invest in additional infrastructure to accept Samsung pay transactions.
Based on the evolution of simple payment services with such differentiated strategies, the domestic mobile payment market has been activated. However, domestic service providers also need to prepare for global companies who want to push into the market.
As of now, the domestic market just seems to have excessive competition. Since there is no policy support, deregulation, or strong infrastructure, domestic companies are likely to lag behind global simplified mobile payment service providers with a system if they enter the domestic market.
Alipay’s statement that the Chinese market is ahead of the Korean market in terms of mobile payment services is raising such concerns even more. The company provides online and mobile simplified payment services and an escrow service, in which consumers can verify whether they are happy with goods they have bought before releasing money to the seller. Alipay accounts for a whopping 74.92 percent share in the Chinese mobile payment market, and has 820 million subscribers in 34 countries.
During a press conference in Seoul in May, Alibaba Group Founder and Chairman Jack Ma Yun said, “In cooperation with Korean partner firms, we want to create localized payment services. We will make Korean Pay just like Alipay.”
For the moment, Alipay does not lead the domestic market. However, the domestic simple payment service market will be greatly hit if Alipay evolves to be a more powerful service by integrating payment data and technology that has been accumulated by the company.
Once foreign fintech companies directly tap into the domestic payment market, they will be able to gradually expand their business areas by easily securing various domestic financial information, which in turn the market share of domestic payment service provider PG and domestic credit card firms will drop, Woori Finance Research Institute expected.
An official from the Information Technology industry said, “Considering the fact that Alipay mentioned specific fintech companies and other financial companies as their partner company in Korea, it is aiming for many benefits in the Korean market. Domestic service providers should not blindly enter the market with just marketing, but prepare for competition with their differentiated technologies and strategies.”