The Bank of Korea to Push for Establishing QR Code Standards

Aug 01, 2018

The Bank of Korea’s Financial Information Promotion Association is planning to establish infrastructures to make mobile debit cards as South Korean Government has put out a policy that will reduce commission from debit and credit cards.
It is going to establish joint QR code standards and apply them to small business pay (zero pay) with ‘almost 0% commission’. It is going to adopt a slogan of app to app payment method and ultimately aim for ‘VAN LESS’ payment system, which is expected to be introduced during the first half of 2019.
The Bank of Korea’s Financial Information Promotion Association voted on a plan that will introduce mobile direct payment service based on bank accounts. This association is composed of 28 financial consultative bodies such as commercial banks and relevant organizations and its executive office is held by The Bank of Korea’s Financial Payment Office.
“Because South Korea’s payment service market is overly dominant with high-cost deferred payment cards such as credit cards, we have decided to prepare joint standards and set up a mobile direct payment service application to reduce social costs.” said Department Head Lee Jong-ryeol of The Bank of Korea’s Financial Payment Office’s Electronic Finance Department. “Affiliated stores can simplify payment process and reduce installation cost of POS reader and they can even reduce commission by working with banks.”
The Bank of Korea is going to introduce QR code-based mobile payment service by utilizing current joint network of cash cards. This service allows owners of affiliated stores of direct payment cards and customers to exchange payment information by installing a Smartphone application, and payment is withdrawn and paid from an account of a buyer.
The Bank of Korea’s goal is to invigorate direct payment card payments.

Financial Information Promotion Association is pushing for bank account-based mobile direct payment service through app-to-app methods such as QR code and others.  Department Head Lee Jong-ryeol of The Bank of Korea’s Electronic Finance Department (right) and Team Leader Lee Byung-mok of Electronic Finance Planning Team are having a press conference at The Bank of Korea’s Briefing Room.  Staff Reporter Lee, Donggeun |  foto@etnews.com <Financial Information Promotion Association is pushing for bank account-based mobile direct payment service through app-to-app methods such as QR code and others. Department Head Lee Jong-ryeol of The Bank of Korea’s Electronic Finance Department (right) and Team Leader Lee Byung-mok of Electronic Finance Planning Team are having a press conference at The Bank of Korea’s Briefing Room. Staff Reporter Lee, Donggeun | foto@etnews.com>

According to The Bank of Korea, number of affiliated stores of cash cards was estimated to be 123,000 at the end of 2017 and it corresponded to about 5% of number of affiliated stores of credit cards (2.5 million).
Because direct payment cards do not go through VAN (Value Added Network) companies or PG (Payment Gateway) companies, commission rates are between 0.3 and 1%. These rates are lower than that of credit card (2.1%) and check card (1.6%).
The Bank of Korea’s Financial Payment Office is predicting that compatibility between South Korean mobile payment services will become better with joint standard. “Relevant task forces are also participating to apply joint standards to small business pay, which is promoted by Ministry of SMEs and Startups.” said Department Head Lee. “Kakao Pay can also introduce direct payment card payments through our API (Application Programming Interface).”
The Bank of Korea’s is going to form a working group for mobile direct payment service under Financial Information Promotion Association and prepare standards in September. Development of necessary platforms will start in November after voting takes place in October.
However, The Bank of Korea still needs to come up with solutions on how it is going to attract people from using direct payment cards more after credit card deduction has been postponed by a year due to revision of tax law by South Korean Government.
“Although credit cards give many benefits to customers, relevant costs are passed onto affiliated stores.” said Department Head Lee. “Although customer benefits are important, we want to change this unfair structure.”
Staff Reporter Ham, Jihyun | goham@etnews.com

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