South Korean Government is working on bringing in VAN (Value Added Network) and PG (Payment Gateway) companies to expand its simple payment system called Zero Pay.
Although its initial plan was not to include VAN companies to reduce the cost of fees, it has decided to take a step back. It realized that Ministry of SMEs and Startups (MSS) has limitations with franchise agreement and it has decided to receive help from VAN companies that have network throughout South Korea.
According to industries, MSS and Seoul-si held a briefing session on the 14th regarding participants of Zero Pay and they have decided to expand participants to electronic financial business operators.
This indicates that MSS is trying to attract VAN and PG companies to become participants of Zero Pay.
It was confirmed that MSS had preliminary discussions with VAN industry. MSS offered VAN industry to participate in Zero Pay and it also met with large-scale franchise stores. MSS offered to give up to 10% of fees that come from using Zero Pay by general and large-scale franchise stores to VAN companies.
NICE Information & Telecommunication, which is the biggest VAN company in South Korea, decided to participate in Zero Pay. Other medium-scale and large-scale VAN companies such as KICC are also looking into participating in Zero Pay.
It is as if there is not much difference between Zero Pay and simple payment infrastructures being pushed by credit card companies.
Many VAN and PG companies attended the briefing session. Companies that attended the briefing session are Korea Financial Telecommunications & Clearings Institute, SMT, KG INICIS, Smartro, 11 Street, 8BYTE, KOCES, Royal Members, Mother Teran, First Data Korea, Paycoq, Korea Smart Card, Shop on Air, Uracle, T-monet, Harex Infotech, HR Communications, KSNET, Finnq, Daou Data, BIS, Kwang Woo Information & Communication, Kovan, Korea Information & Communication Co., NICE Information & Telecommunication, NHN KCP, Korea Digital Receipt, and Payup.
Practically every major VAN and PG company attended the briefing session.

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However, most of simple payment providers except for large-scale simple payment providers such as Finnq did not attend the briefing session because firm banking issue has not been resolved yet and the goal of this briefing session was to encourage participation of VAN and PG companies in Zero Pay.
“It is as if South Korean Government does not know anything about structures of markets.” said CEO of a simple payment provider. “South Korean Government is basically raising entry barrier by gathering VAN and PG companies to its Zero Pay project.”
“Although we can deal with South Korean Government invading business areas of private companies, we cannot understand the fact that it is opening up Zero Pay to VAN and PG companies.” said CEO of another simple payment provider who attended the briefing session.
Simple payment providers criticized South Korean Government by saying it has only raised a entry barrier higher for simple payment providers.
Zero Pay requires payment providers to have their own payment applications. Companies that operate simple payment services based on web cannot participate in Zero Pay. Firm banking issue also needs to be resolved separately with commercial banks.
Some industries believe that this decision is a realistic choice by MSS to increase number of franchise stores.
“Reason why we decided not to include VAN and PG companies is not because we wanted to prevent them from participating in Zero Pay, but because we wanted to reduce relevant costs.” said a representative for MSS. MSS also announced that it will lower entry barrier for simple payment providers little by little so that various businesses can freely compete against one another within Zero Pay.
Staff Reporter Gil, Jaeshik | osolgil@etnews.com