More than half of card spending in Korea now skips the plastic

More than half of card spending in Korea now happens without anyone pulling out a physical card.

Payments made through smartphones and other devices accounted for 55.7 percent of credit and debit card spending at domestic merchants in the first half of the year, according to the Bank of Korea (BOK). The share was up 8.7 percentage points from 47 percent in the first half of 2021.

Such payments averaged 1.79 trillion won ($1.3 billion) a day, up more than 660 billion won from 1.13 trillion won five years earlier.

Phones are replacing ID cards, too. Resident registration cards and driver's licenses can now be carried on a smartphone, and a mobile ID is enough at hospitals and government offices.

“In the past, if I left my wallet at home, I would feel anxious all day and could not focus on work,” said a 51-year-old office worker surnamed Son. “Now, thanks to mobile pay and digital wallets, I did not feel inconvenienced at all.”

Son had reached the subway station on his way to work only to realize the wallet holding his transit card was still at home. Instead of turning back, Son went through the ticket gate with a mobile transit card app.

At the office, Son ordered coffee on a payment app and tagged a mobile employee ID to get through the lobby gate. Lunch and a book order were paid for by phone as well, and no plastic card or cash came out all day.

Korea is not alone. Across major economies, payments made with only a mobile device, without a card or cash, keep growing in both share and value.

China leads major economies by a wide margin. Mobile wallets accounted for 87 percent of in-store spending in China last year, up from 40.2 percent in 2020, according to the annual Global Payments Report published by payments company Worldpay. QR transactions that and pull the money straight from a bank account make up nearly 90 percent.

In Shanghai, Yu Mei, a 38-year-old homemaker, uses WeChat Pay QR codes for everything from breakfast to vegetables at traditional markets and pays apartment maintenance fees through Alipay's utility payment service. Holiday money for the parents-in-law goes out as WeChat hongbao, or digital red envelopes.

The red wallet her husband gave her for her last birthday still sits unopened, Yu said.

Mobile payments are climbing in the United States as well. Payments made with a mobile phone accounted for 27 percent of U.S. consumer payments last year, up 4 percentage points from 23 percent a year earlier, according to the Federal Reserve's Diary of Consumer Payment Choice. Market research firm eMarketer has forecast that mobile payments at the checkout will make up nearly 30 percent of U.S. retail spending this year.

Cash, meanwhile, is losing ground. It accounted for 17.4 percent of individuals' average monthly spending in Korea last year, down 4.2 percentage points from 21.6 percent in 2021, according to a BOK survey. The share of people who spend less than 500,000 won in cash a month rose from 59.6 percent to 80.1 percent over the same period.

Even cash gifts at weddings and funerals, as well as tips, are now commonly sent by mobile transfer.

Banks are cutting back on ATMs. The number of bank ATMs nationwide stood at 24,711 at the end of June, down 15.7 percent from the end of 2022, according to Financial Supervisory Service data.

“If stablecoins come into everyday use, credit cards and cash could be used far less often,” a banking industry insider said. Stablecoins are virtual assets whose value is pegged to legal tender such as the dollar.

Older people, children and foreigners, who are less able to use digital platforms and devices, could find it harder to pay for things as the shift continues.

Jenny, a 35-year-old American tourist, has been urging friends to learn how to pay by phone before traveling to Korea. The won banknotes that Jenny exchanged before the trip were of little use from the moment of arrival. Few places took cash, from kiosks at airport cafes to city buses that have gone cashless.

Payments could also grind to a halt in emergencies such as device failures, dead batteries, network outages and hacking attacks.

“Paying in cash is costlier than paying digitally, given the expense of issuing, circulating and managing currency,” Jeong Dae-young, a professor of economics at Yonsei University, said.

“We need to build a system in which the money saved by digitizing payments can go toward expanding payment assistance services for vulnerable groups, such as automated help kiosks.”

BY KIM DO-NYUN [[email protected]]