South Korea has enjoyed rapid economic growth since the 1950s, creating an environment that is ripe for developments in the mobile and contactless sectors. Back in the 1960s it had a GDP per capita comparable with the developing nations of Africa and Asia, but by 2004 it had joined the trillion dollar club of world economies. It is now one of the world’s 20 largest, with its per capita GDP topping US$31,700 in 2011.
In 1993, Kim Young Sam became South Korea’s first civilian president following 32 years of military rule. Since then, its various governments have pursued policies of global engagement, including hosting the G-20 summit in November 2010 and the Nuclear Security Summit in March 2012. It is also a key player in the international sports arena having hosted the 1988 Summer Olympics and jointly providing the venues for the 2002 FIFA Soccer World Cup with Japan. The country is also the location of the 2018 Winter Olympics.
Its excellent telecoms infrastructure has provided a strong foundation for developments in the contactless and mobile markets, in a nation where the median age of its citizens is 38.4. According to 2010 statistics, it had 28.543 million land lines and 50.767 million cell phones subscriptions. By 2011, the latter figure had risen to an estimated 52.6 million, representing a 108% penetration rate. The market is dominated by mobile network operator (MNO) SK Telecom, followed by KT and LG U+. This trio has been at the vanguard of contactless deployments for some time – although often using proprietary technology – with KT operating an NFC mass transit service in South Korea since 2002.
As the home of Samsung Electronics, one of the pioneers of contactless and the number two global handset manufacturer, you may well expect great things of South Korea – and you won’t be disappointed. In 2011, it made significant strides with the introduction of NFC-enabled handsets and terminals. For example, SK Telecom continued phasing out its proprietary technology, opting instead to launch a service with standard NFC phones.
The country’s MNOs are certainly stepping up to the NFC plate, with its three main MNOs taking delivery of 5 million NFC-enabled SIMs during just one quarter of 2011. They also distributed more than 5 million NFC handsets, including the Galaxy S II, Vega Racer, LG Optimus, BlackBerry Bold and Nexus S. In addition, Samsung began shipping the Galaxy Note incorporating an NFC chip.
KT continued to make progress with the commercial rollout of its NFC service based on Samsung’s SHW-A170K handset, delivering 2 million NFC SIMs by the beginning of 2012. It also sold more than 900,000 NFC-enabled Samsung Galaxy S II cell phones and in excess of 200,000 of Pantech’s Vega Racer handsets. The firm’s 25,000-plus iPhone customers got a bonus from its rollout of an iCarte attachment that enabled them to make NFC payments at more than 100,000 terminals. It pre-loaded Shinhan Card, Woori BC Card and KB Kookmin Card applications supporting MasterCard PayPass on the iCarte’s secure chip. As part of its promotion of the attachment, KT and its partners announced plans to incentivise users , including offering discount coupons to customers who buy and activate the device.
The number of contactless acceptance terminals is keeping pace with the rollout of handsets. There are now estimated to be as many as 200,000 in the country capable of accepting MasterCard PayPass and Visa payWave.
The number of merchants accepting contactless is also growing. Of particular note was the announcement last year by food and retail group Lotte that it was starting to accept mobile payments from KT. Customers could use their Samsung Galaxy S II handset to pay for items and earn loyalty points for future discounts.
In another major development, the Grand Korea Alliance, which comprises MNOs, handset manufacturers, card issuers and government agencies, opened an NFC shopping mall in one of the commercial districts of its capital city of Seoul. This enabled shoppers to make NFC-based payments at 200 merchants, order drinks, and download coupons and transit information from smart posters. The service could also be used for peer-to-peer NFC payments and transport ticketing.
NFC continued to make big inroads in the transport ticketing sector. For example, KT released some impressive figures which revealed that NFC prepaid transit services were used by its subscribers 30 million times during 2011. It also rolled out 12,000 smart posters at bus stops in and around Seoul.
South Korea’s MNOs teamed up with their Japanese counterparts to create cross-border NFC services in a move away from their national technologies. KT signed a deal with Japan’s NTT DOCOMO to develop payment, ticketing and couponing that will enable customers travelling between the two nations to access services using their NFC-enabled Android handsets. Other organizations involved in this initiative include Samsung, Gemalto, Visa, Sumitomo Mitsui Card and bitWallet.
SK Telecom ran a pilot with Japanese MNOs to enable Korean and Japanese consumers to use their NFC phones to make payments on public transport and at convenience stores in Seoul and Pusan that accept SK Telecom’s T-Cash prepaid payment service.