Samsung Pay [Courtesy of Samsung Electronics]
The market for “easy payment,” which allows users to store their credit card information on a device such as a smartphone and make quick payments by using their fingerprint or password, is experiencing rapid growth in South Korea.
According to data from the Financial Supervisory Service on Monday, the combined payment amount of four major easy payment service providers in Korea - Samsung Pay operated by Samsung Electronics Co., Naver Pay by Naver Financial Corp., Kakao Pay by Kakaopay Corp., and PAYCO by NHN Corp. - amounted to 147.79 trillion won ($111.17 billion) in 2023. This is an increase of 16.69 trillion won from 131.09 trillion won a year earlier, indicating that consumers spent around 17 trillion won more on easy payments than a year ago.
The combined payment amount for the four companies remained in the 28 trillion won range until the first quarter of 2022 but topped 30 trillion won from the second quarter onwards and has been increasing every quarter since. The combined payment amount hit an all-time high of 39.38 trillion won in the fourth quarter of 2023 and combined with the payment amount from Apple Pay by Apple Inc., which is not included, the size of the easy payment market is expected to be even larger.
Easy payment services are popular among consumers because they allow users to store relevant information and pay easily without having to go through complicated procedures such as card verification or installing an authorization certificate. As online and non-face-to-face payments have become widespread since the COVID-19 pandemic, various companies such as distribution and delivery have entered the market alongside financial companies, accelerating the market’s growth. The introduction of easy payment systems in offline establishments and the proliferation of kiosks have also contributed to the market’s growth.
Samsung Pay, which allows easy payments by simply tapping the back of Galaxy smartphones, is virtually dominating the market in the offline payment sector.
Samsung Pay’s payment amount grew by nearly 20 percent to 73.18 trillion won in 2023 from 60.86 trillion won in 2022. This is an increase of more than 12 trillion won in a year, or about 73 percent of the total increase of 16.69 trillion won in payment amounts for the four easy payment service providers combined.
Other easy payment service providers are also joining Samsung Pay. Naver Pay has been integrated with Samsung Pay since March 2023, resulting in a 16 percent increase in Naver Pay’s payment amount in 2023 compared to 2022, while Kakao Pay and PAYCO, which are not yet integrated with Samsung Pay, saw a payment amount decrease of 4 percent and 5 percent respectively.
Kakao Pay is scheduled to be integrated with Samsung Pay from April 2024 onwards and with the expanded integration of easy payment services enabling offline payments, it is expected that the easy payment market will grow even further.
“The increasing smartphone penetration rate has led to a higher frequency of payments via smartphones. The preference for non-contact payments after the Covid-19 pandemic has also facilitated the use of easy payments,” noted Seo Ji-yong, professor of business administration at Sangmyung University. “With the emergence of various easy payment service providers, increased consumer benefits and the expansion of the user base to middle-aged and elderly people, the market is expected to continue to grow moving forward.”
Meanwhile, the market for “buy now pay later” (BNPL) services, considered an innovative financial service, is declining in growth. The usage amount of major BNPL service providers -Naver Financial, Kakaopay, Viva Republica Inc. - fell from 136 billion won in the first quarter of 2023 to 115.8 billion won in the fourth quarter.
BNPL is a credit transaction service where consumers can make a purchase before paying, allowing them to receive the goods first and pay for them later. It was designated as an innovative financial service in 2021 as it allows those with no credit history to make small transactions.
“It is relatively easy to issue credit cards in Korea, but the market for BNPL services has not grown significantly due to low usage limits and limited online usage,” an industry insider said.
By Park Na-eun and Yoon Yeon-hae
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]