MOBILE PAYMENTS IN SOUTH KOREA SUCCEEDING IN A DIVERSIFIED MARKET

1. MOBILE PAYMENTS IN SOUTH KOREASUCCEEDING IN A DIVERSIFIED MARKET March 12, 2013 KyongSun Kong Analyst, Asian Financial Services group　 kkong@celent.com

3. Content • Mobile Payments Environment 3 • The Diversifying Mobile Payments Market 7 • The Advent of the Digital Wallet 17 • Paving a Path to Success 20 • Conclusion 22

4. Mobile Payments Environment Section 1

5. Players in the Mobile Payments Market

6. Proliferation of Mobile-Payment-Enabled Phones • In August 2012, the number of smartphone subscriptions topped 30 MM. Of these, approximately 15 MM devices were outfitted with NFC, and the number was projected to reach 20 MM by the end of 2012. It is forecasted that by August 2013, South Korea—with its population of 50 MM people—will reach 40 MM smartphone subscriptions, with the percentage of NFC-enabled smartphones only expected to rise Smartphone Subscriptions in South Korea Source: Korea Communications Commission

7. Payment Terminal Source: Celent

8. The Diversified Mobile Payments Market Section 2

9. Online Payments Source: Celent

10. M-Commerce • There are good reasons why mobile card payments have grown in the m-commerce sector. Historically, using m-commerce to shop entailed inputting one’s credit card information each time a purchase was made. In addition, security codes, PINs, and the like meant that customers had input data multiple times to make a payment. While this doubtlessly heightens security, from the perspective of consumers it is inconvenient Breakdown of Hana SK Card Mobile Card Payment by Source(Est. total for 2012: US$53.55 MM) Source: Hana SK Card

11. Mobile Prepaid Cards • After the service offering began in May 2011, it reached 1 MM cards in December 2011, 2 MM in March 2012, 3 MM in June 2012, and then topped 4 MM in November 2012, a mere 18 months later. It seems to have been buoyed by the timing, which coincided with the sudden jump in NFC-equipped smartphones Number of Mobile Cashbee Cards Issued Source: EB Card

12. Mobile Credit Cards • Hana SK Card is clearly enjoying steady growth in terms of cards issued, but how about in terms of payment volume? In 2010, payments totaled US$923,000; this rocketed to US$10.2 MM in 2011. Furthermore, this figure is forecast to rise to US$53.6 MM. This translates into a phenomenal 661.7% CAGR. Growth is expected to continue through 2013, with a 569.5% CAGR for the period from 2010 to 2013, with payments forecast to total approximately US$280 MM in 2013 Hana SK Card Mobile Card Payment Volume Source: Hana SK Card

13. Mobile E-Money • One interesting and fun feature in ZooMoney is the “Go Dutch” or “split the bill” feature. This is designed to easily and evenly divvy up the bill at gatherings of multiple people. Users input the number of people paying, the total sum, and the phone numbers and names of the people splitting the bill before hitting send. Each individual will receive a message in his or her ZooMoney message box requesting the desired amount Source: ZooMoney

14. Mobile E-Money • Cashnut carries a game-like feature with which users can split payment for bills. This feature –the name of which roughly translates to “lucky and unlucky” – resembles a game of roulette. After inputting the information of the individuals to split the bill, the user shakes the screen, and a roulette wheel appears. The spinning wheel selects certain members of the party to pay while letting others off the hook. Cashnut hopes to use this to spark consumer interest in the service Source: Hana N Wallet

15. Mobile Debit Services • Moca Pay offers four ways to make payments: barcode, 2D barcode, NFC, and smartorders. A smartorder is a newly conceived payment method that lets users avoid waiting in line by preordering or completing a payment before visiting a shop. The service was developed with a vision of it being used in settings such as a coffee shop Source: KT

16. Barcode Payments • In February 2012, Hana SK Card launched a barcode prepaid card service, issuing cards at a rate of approximately 10,000 a month • Hana Bank is offering a barcode payment service that can be used to make payments at convenience stores under its Hana N Wallet service. As of November 2012, this service is only available for use at convenience stores Source: Hana SK Card, Hana Bank

17. QR Code Payments/Tag Payments • QR code payments • There may be smartphones that do not carry NFC technology, but all smartphones have cameras. Moreover, the burden for stores is minimal, because only the 2D barcode must be supplied, and the customer’s smartphone will act as the payment terminal doing all the rest. Of course, there will be the deployment costs associated with a 2D barcode-generating POS system, but such systems are already rapidly being adopted and attracting interest as a novel approach to mobile payments. • Tag payments • Tag payments are one type of NFC payment. They do not require an NFC payment terminal. Instead, they use an NFC tag in the form of a sticker that is activated for a payment when the NFC-equipped device is put sufficiently close. This has the dual merits of not only greatly reducing the outlays associated with purchasing conventional payment terminals but also significantly reducing the time and labor associated with deploying NFC payment terminals.

18. The Advent of the Digital Wallet Section 3

19. Primary Digital Wallet Services in South Korea

20. Primary Digital Wallet Features

21. Paving a Path to Success Section 4

22. Paving a Path to Success • Differentiation from Plastic Cards • Increasing Locations Accepting Mobile Cards • Consumer-Driven Promotion • Multifaceted Service Offerings • The Globalization of Mobile Payments

23. Conclusion Section 5

24. Conclusion • Celent offers the following proposals for companies that are considering deploying mobile payments services • A variety of mobile payment methods and options should be employed to increase convenience. In particular, when it comes to offline payments, introducing not only NFC payments but a range of options can be expected to encourage consumer use • The days when the payment features of mobile payment offerings were enough to draw the interest of consumers are past. Firms should consider introducing digital wallet services, which are spreading globally, and need to look to offerings that together offer both coupon services and membership services. In addition, companies will need to satisfy consumers by providing value-added functions, such as the bill-splitting feature, that harness the unique attributes and features of mobile payments • Payments are only going to become more international. Today roaming phone services follow us overseas, as do credit cards. Working to shore up the requisite infrastructure so that smartphones can be used to make international payments is the kind of jump in convenience that should be pursued

25. Thank you! My contact information: kkong@celent.com My business development colleague: maquino@celent.com A recording of today's webinar and copy of the presentation will be available to Celent clients on our website at http://reports.celent.com/login.asp