Will Apple Pay contend in land of Samsung Pay?

Apple Pay’s long-awaited South Korean debut seems imminent, even as local partner Hyundai Card’s lips appear tightly sealed.

On Friday, a photo went viral on Asamo, a Naver blog for Apple products users. It showed a kiosk machine at Kimganae, a local gimbap chain, with a sign that read “Payment with Apple Pay.”

Many blog readers did not hide their excitement.

“Finally, Apple Pay in Korea,” a user commented on the post.

“If it works in Kimganae, I guess that it will work in most local stores soon,” another commenter said.

An official from the Financial Supervisory Service also confirmed the financial regulator has completed review of Apple Pay’s terms and conditions.

“We are still discussing some additional matters before its official launch,” the representative told The Korea Herald, declining to further elaborate on the exact launch date.

Some users of Samsung’s Galaxy smartphones also said they would be more willing to switch to Apple’s smartphones.

Since 2015, Galaxy users in Korea have been able to use Samsung Pay, a Samsung Wallet feature that enables consumers to register a bank card on a smartphone device for digital payment with just one swipe.

As it allows users to live without a wallet, many Galaxy users have been claiming that it is a feature with a lock-in effect.

Unlike excitement among consumers here, outlook for Apple Pay’s success still remains mixed.

One of the key obstacles is a lack of technological infrastructure.

Most local retailers use magnetic secure transmission technology, in which devices such as smartphones emit a signal that mimics the magnetic stripe on a traditional payment card. But Apple Pay works with near-field communication technology, which is a short-range wireless technology.

Currently, NFC technology is only applied to limited number of large franchise outlets such as McDonald's, Starbucks, Ediya Coffee and Lotte Hi-Mart.

According to industry insiders, less than 10 percent of 2.9 million stores with card readers uses NFC technology in Korea. It costs around 150,000 won ($115) for the store owners to install the new card reader with NFC technology.

“Hyundai Card seems to have considered compensating retailers for installing a new NFC device, but it is subject to antitrust scrutiny,” said Seo Ji-yong, a business professor at Sangmyung University.

Adding to that, Seo spoke of business uncertainty after the Apple and Hyundai Card partnership. Industry sources said the two entities are presumed to have signed a one-year contract, with no specifics decided after that.

“The first year of business is crucial for its market expansion. Depending on that, Apple could seek to diversify its credit card partners,” he added.

Local credit card issuers are also closely monitoring Apple Pay’s market debut and its partnership with Hyundai Card.

According to industry tracker Counterpoint Research, Samsung’s smartphone users accounted for 84 percent of the Korean market while iPhone users accounted for 13 percent during the third quarter of this year.

Considering the smaller number, the new payment service may have a limited impact in attracting new credit card consumers initially, but sources say Hyundai Card could seek to lock in young customers in their 20s and 30s who are also trendsetters and big spenders across industries.

“For now, we see a limited impact from Apple Pay. But we are closely watching the situation for possible business opportunities,” said an official from a local credit card company who wished to be unnamed.