Like a Bus Card Tap... Increasing 'Contactless' Cards Thanks to Apple Pay

Shinhan Card Accelerates Expansion of Contactless Card Issuance
Reissues Existing Cards with New Features... Samsung and Hana Also Join
Impact of EMV Standard Terminal Spread via Apple Pay

Recently, the 'contactless card,' a near-field communication (NFC) based contactless payment feature, has been rapidly spreading in South Korea. Unlike overseas markets where it has already become a standard, the domestic market had been stagnant for years due to issues such as terminal distribution. However, with the arrival of Apple Pay, terminals have been distributed, and users have started to find it convenient, prompting card companies to accelerate their efforts.

According to industry sources on the 23rd, Shinhan Card, the top card company, has recently been actively increasing the distribution of cards equipped with contactless functionality. Since October last year, all newly launched card products support contactless payments. This month, 12 Visa and 5 MasterCard types will additionally support contactless payments.

Contactless functionality is also being steadily added to previously issued cards. Even cards that did not have contactless features at the time of issuance can support contactless payments upon reissuance. As of last month, 42% of cards issued in partnership with Visa and MasterCard already support contactless payments. A Shinhan Card representative explained, "Currently, 90% of our main cards are being issued as contactless cards."

Contactless payment, as the name suggests, is a payment method without physical contact. Payments are made by simply holding the card near the terminal within a certain distance, similar to a bus card, without swiping or inserting the card. To make contactless payments, an NFC terminal that applies the EMV standard developed jointly by Europay, MasterCard, and Visa is required. Since domestic NFC terminals do not follow the EMV standard, most are limited to domestic cards or some simple payment services, and contactless payments have not been widely used.

Hyundai Card was quick to adopt contactless payments, issuing contactless cards since February 2017. Currently, 99.8% of the credit cards they issue support contactless payment. At that time, other card companies were lukewarm about issuing contactless cards. However, recently, following Shinhan Card, Samsung Card and Hana Card have also been accelerating their efforts. Since last year, these two companies have decided to include EMV-based contactless functionality in all their international cards.

The industry views Apple Pay as the reason contactless payment methods have spread in South Korea, which had been isolated like a Galapagos from international standards. Apple Pay also only works with NFC terminals that apply the EMV standard. Although EMV standard NFC terminals had been installed in only about 10% of all merchants, the atmosphere is changing with Apple Pay's arrival in the country. There are even reports of merchants expressing willingness to replace their terminals directly.

With the increase in overseas travel demand, more consumers have experienced the convenience firsthand. Contactless cards allow fast and easy payments like bus cards and can be used as transportation cards in several countries such as the United Kingdom, Spain, Italy, the United States (some states), Hong Kong, and Singapore without any special procedures. According to a survey conducted this year by Visa Korea targeting 1,000 men and women aged 20 to 59 in the metropolitan area and five major cities, 7 out of 10 respondents said they would use contactless cards within a year. An industry insider said, "There was a sentiment that there was no need to incur costs, but the atmosphere is changing with the arrival of Apple Pay," adding, "Both customers and merchants want it, so from the card companies' perspective, now is the right time to expand contactless payments."