[Pay War Act 2]②That Regrettable Moment... Apple Pay and NFC Could Have Landed

8 Years of Landing Attempts Since 2015
NFC Terminal Adoption Still a Challenge
Pay Galapagos vs. Leading Countries at a Crossroads

This is not the first time Apple Pay has knocked on the door of the domestic market. Not only the introduction of Apple Pay but also the widespread adoption of near-field communication (NFC) terminals, which remain a challenge in the domestic payment market, had opportunities to be promoted in the past. Experts point out that to keep up with global trends and become a leading country, such opportunities must be seized.

Apple Pay: Warming the Stove for 8 Years

The first discussions about introducing Apple Pay in Korea took place around 2015. At that time, Hana Financial Group and some domestic credit card companies contacted Apple. During this process, the domestic NFC payment environment and system were reviewed, and it is said that payment demonstrations were even conducted at some merchants. However, Apple Pay's landing ultimately failed. This was due to a failure to reach an agreement on cost burdens. Card companies expressed reluctance over Apple's fee, which amounted to as much as 0.15% per transaction, but Apple insisted that due to its own policy, it could not offer a lower fee only in Korea. There was also no consensus on who among Apple, domestic card companies, and payment network firms would distribute NFC payment terminals.

After several years of silence, rumors of Apple Pay introduction resurfaced from 2018. Apple began supporting Korean won payments for all services. The following year, news that payments on the Apple App Store would be possible with cards from eight domestic card companies further raised expectations for Apple Pay's arrival. In 2020, some card companies even began pushing for Apple Pay introduction as part of new business initiatives. However, the issue of terminal distribution costs and fees still could not be overcome, and the plan failed again.

In 2021, the hope for iPhone users was rekindled. Apple launched Apple Pay in Israel, setting the fee rate at a lower 0.05% compared to the previous 0.15%. Domestic card companies also responded that they could positively consider such conditions. However, Israel adopted the EMV standard, an NFC specification jointly created by Europay, Mastercard, and Visa (VISA), which differed from the domestic situation. Moreover, the persistent problem of NFC terminal distribution was not resolved, and the launch failed again.

The Persistent Challenge of NFC Terminal Distribution?If Only It Had Been Solved Then...

On the 23rd, a customer is making a payment using Apple Pay at a coffee shop in Seoul. Photo by Jinhyung Kang aymsdream@

Even at the point when Hyundai Card finally brought Apple Pay into Korea, the cost of distributing NFC terminals remains a long-standing challenge for the card industry. At one time, domestic card companies were reluctant about the contactless payment method via NFC itself. A representative example is the 2015 conflict over whether to add NFC functionality, with major companies like Shinhan Card, Samsung Card, and Hyundai Card focusing on app card methods, while mobile card camps like Hana Card and BC Card opposed.

Mobile cards embed a financial function SIM chip into smartphones. NFC-enabled card terminals recognize this and process payments. Hana Card (SK Telecom) and BC Card (KT), which focused on mobile cards based on partnerships with telecom companies, proposed replacing IC terminals with NFC-enabled ones at additional cost. However, card companies focusing on app cards, which process payments via barcodes or QR codes within apps, opposed switching to NFC-enabled terminals. A card company official said, "Even then, NFC was already a global trend," adding, "If NFC terminals had been proactively distributed at that time, Apple Pay introduction could have been several years earlier."

Pay Galapagos vs. Pay Leading Countries

However, the introduction of Apple Pay does not guarantee success. China and Japan, introduced in 2016, are representative cases. Especially in Japan, despite the overwhelming iPhone market share, Apple Pay has not spread easily. According to Japanese market research firm MM Research Institute, among 31.67 million smartphones shipped in Japan last year, Apple accounted for 48.8%. Although slightly declining, Apple has maintained the number one market share for 11 consecutive years.

Nevertheless, with cash payments accounting for 80% and local companies like PayPay, Line Pay, and Quick Pay first dominating the market, Apple Pay's popularity has been sluggish. Mr. Kim, who has worked at an IT company in Tokyo for six years, said, "Samsung Pay works everywhere in Korea, but in Japan, each pay service has different affiliated merchants, creating a warring states period," adding, "Especially since people are accustomed to QR payments and do not perceive them as inconvenient, Apple Pay's simple payment method has not spread well."

Therefore, there is analysis that domestic simple payment companies and card companies can evolve beyond merely competing with Apple Pay to leading the simple payment industry by leveraging their respective strengths. Park Ji-hong, a research fellow at Hana Financial Management Research Institute, said, "With Apple Pay's arrival, which has considerable ripple effects, both simple payment companies and card companies are busily responding," advising, "Card companies, which will be most affected in terms of profitability, need to expand cooperation among card companies through open pay and strengthen functions such as product brokerage platforms and data-based businesses."