Global tech companies’ entry into the nation’s mobile payment market may hinder the growth of early-stage fintech startups, industry watchers say. Fintech, a convergence of finance and technology, is a range of new financial services offered through information technology platforms.
Amid slow growth in the local fintech industry, global tech giants including America’s PayPal and China’s Alipay have already expanded their financial services from simple mobile transactions to loans, investment and asset management. They are now eyeing Korea’s mobile payment market, untapped by local firms on account of weak infrastructure and strict regulations.
America’s largest digital wallet business PayPal, which has over 150 million clients worldwide, has recently made inroads into Korea’s online payment market. It partnered with Hana Bank last April to provide money transfer services abroad for local users, and with KG Inicis, a payment gateway service provider, to help overseas customers purchase goods from local online shopping malls.
China’s e-commerce company Alibaba Group’s Alipay has forged a partnership with Hana Bank to provide online payment services for Chinese tourists in Korea ― over 6 million of whom visited in 2014 ― in about 400 Korean stores including duty-free shops and shopping malls. The firm also plans to operate an offline payment system in some local stores this year.
Tenpay, the online payment service provider of the Chinese tech giant Tencent, is also eyeing the local online payment service market by partnering with local shopping sites including Interpark.
Apple’s mobile payment system Apple Pay on the iPhone 6 and iPhone 6 Plus is also expected to hit the local market soon, according to market watchers. Currently, users with credit cards issued in the United States are able to use the Apple Pay service in some local stores including Starbucks and GS25, one of the nation’s biggest convenience store chains.
Local experts have raised concerns that global tech giants’ entry into Korea’s 15 trillion won ($13 billion) mobile payment market may threaten early-stage local fintech start-ups.
“If global IT firms successfully tap into the local mobile payment market, this would take a significant market share from local companies and also weaken their competitiveness,” said Kim Jong-hyun, a researcher at Woori Finance Research Institute.
The nation’s top mobile messenger operator Daum Kakao is currently the only prominent fintech provider in the local market. Since the company launched its mobile payment services Kakao Pay in September and Bank Wallet Kakao in November, the services have drawn 2 million and 500,000 subscribers, respectively.
Naver, the nation’s top Internet portal operator, and Samsung Electronics are also eyeing the fintech industry but neither have come up with services yet.
Industry watchers blame the slow growth on the strict regulations for the local fintech industry.
As a case in point, Hankooknfc, a small local fintech start-up developing mobile near field communication services, developed mobile payment technologies and obtained relevant licenses last year, but had to spend over eight months waiting for approval from deliberative bodies to start its business.
Calling for easing regulations for the fintech industry, Hwang Seung-ik, chief of Hankooknfc, said, “When new technologies are unable to hit the market at the right time, they can easily become useless.”
By Shin Ji-hye (
shinjh@heraldcorp.com)
