Credit card in mobile, a new trend in finance
Posted: July 12th, 2010, by Yunho ChungOn March 26th, HanaSK Card, the JV of Hana Card and SKT, launched its first service called Touch 7. Touch 7 is a mobile credit card consisting of a mobile card loaded on a 3G USIM. It also has its plastic card version. After downloading the HanaSK VM through SMS, users can pay by a simple touch of their mobile phones at Touch 7’s member retailers. At non-member retailers, they can still pay by swiping the plastic card.
SKT is Korea’s leading MNO with over 50% of the market share. Hana Card is a subsidiary of Hana Financial Group which is Korea’s 4th ranking financial holding company by total asset as of 2009. Hana Card itself was amongst the lowest ranking credit card issuers in Korea with only 4% of the total market share. These two companies joined hands to create HanaSK Card last year and to provide mobile integrated payment services.
In early 2000, SKT launched a mobile finance service called Moneta, but it ended in failure. One of the reasons included difficulties in cooperating with credit cards companies. They felt threatened by SKT’s entry into the credit card market.
In 2009, SKT began its negotiation with Hana Financial Group in regard to acquiring or investing in Hana Card. The negotiation had been delayed for seven months until reaching an agreement at the end of 2009. In early 2010, HanaSK Card was established and it launched its first service in March.
A brief timeline
2009. 12: Investment agreement
After seven months of a negotiation marathon, SKT decided to invest in Hana Card. SKT paid KRW 400 billion to acquire 49% of shares and became the second largest shareholder. Hana Financial Group holds 51% and management control.
2010. 2: Inauguration of HanaSK Card
HanaSK Card was established to shape the credit card market in new ways by combining ICT and financial services. It aimed to provide smarter card services such as mobile credit cards, integrated memberships, mobile coupons, and etc.
2010. 3: Touch 7 Rollout
Touch 7 gives discount benefits to the card holders at various places such as Home Plus (Supermarket chain), Family Mart (Convenience store), and SK gas stations. Additionally, customers can get discounts for their mobile phone bills up to USD 12 per month. Other benefits include those of financial services such as ATM fee waivers, exchange commission discounts, and loan interest discounts in HanaBank. Touch 7 has mobile coupon functions and is replacing Korea’s major membership cards such as T-Membership (SKT membership card) and OK Cashbag (Korea’s biggest royalty program).
2010. 4: Nexen Heroes
HanaSK Card began to cooperate with Nexen Heroes (one of Korea’s professional baseball teams). Heroes’ home game buyers can get approximately USD 2 discounts for every game. 0.1% of each card holder’s transaction will be contributed to the team’s fund.
What’s behind the rollout of HanaSK Card services?
First of all, high 3G penetration in Korea provides better environment for mobile finance services due to the USIM chips, which can include not only subscriber information but also other applications. In fact, Korea’s 2G standard was CDMA which did not require a SIM card. And thus MNOs (or financial institutions) had to issue a separate mobile finance chip to offer mobile finance services and that required significant investments. However, Korea adopted WCDMA as its 3G standard, and the migration was very fast and successful. According to an OECD report in 2009, Korea’s 3G migration is almost 100%, followed by Japan’s 82%. It means that now almost every Korean has a USIM loaded mobile phone, and that mobile finance services will be able to be deployed easier than before.
In addition, synergy can be created from the cooperation of these two companies. From Hana Card’s point of view, SKT’s subscriber base is very attractive. While the population of South Korea is less than 50 million, SKT has 25 million subscribers. And OK Cashbag, Korea’s biggest loyalty market program of SK group, has 30 million subscribers. SKT, on the other hand, knows from past experiences that cooperation with credit card companies is the key to success in the mobile finance sector.
While it may be too soon to judge the prospects of HanaSK Card and its Touch 7 services, HanaSK Card continues to charge forward on its way to mobile finance with its recent launch of Touch S Card earlier this month, which targets smartphone users, especially Galaxy S users. HanaSK Card’s goal is to be placed amongst the top three credit card companies in Korea within five years. The company also aims to acquire 10 million subscribers and to acquire 12% of the market share.
Overall, there are some positive signs for the outlook of mobile finance services in Korea. In addition to HanaSK Card, Shinhan Card and Woori Card also launched mobile finance services. They are respectively subsidiaries of Shinhan Financial Group and Woori Financial Group. In addition, KT also bought 14.9% of BC Card’s share, becoming the third largest shareholder. Such intensifying competition is likely to bring a wave that will put the mobile finance service into full bloom.
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