Apple Pay is a service that makes it easy and safe to pay in stores, websites, and apps without using real cards or cash. This is a payment method released for smart living. When Apple Pay was introduced in Korea, ST dealt with how Apple Pay influenced it, what the problems of Apple Pay were, and what direction Apple Pay should go in order to occupy the simple payment service market. ......Ed
Apple’s simple payment service “Apple Pay” was introduced in Korea in March. It immediately exploded in popularity as the number of card registrations recorded 1 million on the first day of its launch, and the number of offline affiliated stores exceeded 100 within a month. Hyundai Card, who had initially been expected to be an exclusive partner with Apple Pay, gave up its deal, allowing other companies to affiliate with the service. However, it is still the only affiliate that provides the service at the launch. This greatly benefited Hyundai card. The number of new Hyundai Card members more than doubled from the previous month to 203,000 in March.
What is the reaction to Apple Pay, which had a wildly successful launch? Some users are satisfied with the fast payment speed and convenience of payment only with Apple Watch, but others are dissatisfied because of limited franchises, credit card institutions, and lack of transportation card functions. As expected at the time of the launch, it is superior among simple payment systems in terms of payment speed, but there are many opinions that it has not been completely integrated into daily life. Thus, it is necessary to carry a card or cash separately in case it is not available.
Users cannot use the transportation card function because there was no partnership with transportation card companies. Above all, its biggest problem is the limited number of franchises. About 10% of offline stores that are equipped with Near Field Communication (NFC) payment terminals are compatible with Apple Pay among 2.9 million credit card merchants in Korea, and payment is possible mainly in famous nationwide franchise stores.
The continued success of Apple Pay depends on how quickly NFC payment terminals are distributed to attract users. The price tag of 200,000 to 400,000 won per terminal is a burden to small business owners who must bear the cost, but many retailers with MZ generation as their main customers actively demand the installation of the terminal. So, some predict that the payment system may be set up faster than expected. Another difficulty is the commission. Apple charges a fee of 0.1% to a maximum of 0.15% per payment, and Hyundai Card’s fee is 0.15% per transaction, which is known to be the highest among countries that have introduced Apple Pay. If other card companies charge the same fee, profitability may inevitably deteriorate as they suffer from lower affiliate fees and higher procurement costs.
Simple payments that can be conveniently paid without simple verification or information input, as well as cash and cards, have now penetrated consumers’ daily lives. With the domestic market already saturated by other simple payment solutions such as Kakao Pay (42.4% share), Samsung Pay (24% share), and Naver Pay (24% share), and with runners-up Samsung and Naver Pay linking their services to combat the loss of market share, there are still many obstacles that Apple must overcome to ensure continued success, such as commission issues, terminal issues, and partnerships. Also, it is of concern that Apple Pay’s commission policy could work against consumers in the long term, as there are many cases in which the cost of deteriorating profitability of private companies has been passed on to consumers. All eyes are on whether Apple Pay will be able to survive in the domestic simple payment market by overcoming many difficulties among its competitors.
Seo Min-ji (ST Reporter)
seomin2003@soongsil.ac.kr
