[The Editors' Verdict] Misunderstandings About Zero Pay

There are many misunderstandings about Zero Pay. From negative views that the government interferes in the private sector and disrupts the market to inaccurate information such as it being usable only in Seoul, there are many misconceptions, so I would like to clarify the accurate facts. I have long researched the field of e-commerce and published research results on overseas mobile payment trends several years ago. I have also evaluated and presented on the accessibility of various pay services multiple times.

Zero Pay is a mobile simple payment service created by private companies to reduce the payment transaction fee burden on small business owners. Initially, the Ministry of SMEs and Startups formed a task force to promote it, and the Korea Simple Payment Promotion Foundation, a foundation established by private companies, currently operates Zero Pay. Consumers use their mobile payment apps to scan the store's QR code and make payments, which transfers money directly from the consumer's account to the merchant's account.

Zero Pay has the advantage of a simple payment structure based on account transfers, allowing for low merchant fees. Currently, there are 600,000 merchants accepting Zero Pay (compared to about 3 million credit card merchants). There are 38 companies providing Zero Pay services, including 22 financial institutions and 16 fintech electronic financial operators. The number of participating companies continues to increase. Consumers can link their accounts to payment apps from financial institutions and electronic financial operators to use the service.

The Zero Pay service providers include 22 financial institutions such as Gwangju Bank, Kyongnam Bank, Kookmin Bank, Industrial Bank of Korea, NongHyup Bank, Daegu Bank, Busan Bank, Shinhan Bank, Woori Bank, Jeonbuk Bank, Jeju Bank, Hana Bank, SC First Bank, K Bank, NongHyup Central Association, Korea Forest Service Central Association, Saemaul Geumgo, Suhyup Central Association, Credit Union Central Association, and Korea Post; and 16 fintech electronic financial operators including Galaxia Communications, Naver Financial, December & Company, Road System, Lotte Members, Bizplay, Shinsegae I&C, eBay Korea, Cocoon, T-money, Hana Card, Harex Infotech, Korea Information & Communication, Korea Railroad Corporation, NHN Payco, and 11st, totaling 38 companies.

Zero Pay merchant fees are not all 0%. Small business owners with annual sales under 800 million KRW pay 0%, those with sales between 800 million and 1.2 billion KRW pay 0.3%, those with sales over 1.2 billion KRW pay 0.5%, and general merchants pay 1.2%. In contrast, the 2019 merchant fees for credit cards and debit cards were 2.07% and 1.48%, respectively (according to the Credit Finance Association).

Zero Pay can be used at 600,000 Zero Pay merchants through payment apps from 38 service providers, with payments made by direct account transfers from the consumer's account to the merchant's account. Additionally, regional currency called 'Local Love Gift Certificates' can be purchased at about a 10% discount and used with Zero Pay.

Government disaster relief funds can also be used through Zero Pay, and it plans to expand its function as a government welfare delivery system in the future. It is also planning to provide big data-based commercial district analysis services for merchants. Usage is increasing as a payment method suitable for the contactless era brought on by COVID-19.

Since its launch at the end of 2018, Zero Pay's cumulative payment amount recently surpassed 500 billion KRW. Zero Pay uses a QR code payment method, which does not require the cost burden of purchasing terminals, making it easy for small vendors such as street vendors to accept payments. Street vendors can also sell goods using disaster relief funds or Local Love Gift Certificates.

There are some inconveniences for consumers using Zero Pay. Currently, only the QR code payment method is used, which some consumers find inconvenient. To improve this, they are preparing to introduce NFC (Near Field Communication) payment, which allows payment by simply bringing the device close. Payments require a balance like debit or check cards, and the single transaction limit is 2 million KRW. Also, compared to credit cards, there are still fewer merchants, which may cause inconvenience. It is hoped that Zero Pay will overcome these drawbacks and develop into a payment method that provides benefits and convenience to small business owners and consumers while fulfilling its original purpose.