Fintech Beginning
Google is expanding into the financial technology (fintech) market, starting with mobile payments, and the local IT industry is paying a lot of attention to its move. Google's choice of Android, which accounts for nearly 90 percent of the local operating system (OS) market, as a basis of its mobile payment service will have a profound effect on the local fintech market. The fintech market has just started with simple payment services. If the search engine giant adopts a strategy to pre-install Google Play at the same time, which contributes to Android's growing dominance, it will also affect the market greatly.
According to the Korea Internet & Security Agency, Android OS makes up more than 85 percent of the local mobile OS market. The nation's dependence on Android is considered to be the highest in the world. Against this backdrop, if Google comes up with its mobile payment platform like Android Pay, it will be able to easily attract both users and app developers.
Android Pay will reportedly enable companies to develop apps by syncing with the mobile payment platform, while allowing users to make payments within the app by storing credit or debit card information. It will also have an NFC-based Tap to Pay feature, thereby making transactions in offline stores possible. In other words, Google is also targeting the offline payment market.
Pre-installation of Google’s app market will be more dangerous. Google Play and the Apple App Store comprise over 80 percent of the local app market because they come pre-installed on every Android or iOS phone by default. In the past, the three local mobile carriers and Samsung Electronics tried to counter Google's dominance using their influence in the country to pre-install their own app markets as well. But those secondary app markets have not been successful. Therefore, there is growing concern that if the web search giant demands that local handset makers pre-install Google Wallet and Android Pay, the local mobile payment market will never get off the ground. An industry source said, "If a company that dominates the OS market enters the mobile payment market, it could dominate the mobile payment market as well."
There are other factors, though. ITC and financial companies have launched numerous digital wallet services so far, but nothing stands out from the crowd like Alipay or PayPal. In fact, digital wallet services are not popular in the country. Hence, there is possibility that the local market will show a cold response to Google Wallet, even if it comes pre-installed. Another factor is that Google's offline payment service is based on NFC technology. Currently, NFC-based mobile payment systems are not fully commercialized in the nation, as shown by the fact that there are only 26,000 NFC-enabled point-of-sale terminals nationwide.