Korea’s financial watchdog remains cautious regarding Apple Pay’s rollout in Korea, contrary to rumors of the digital payment service’s imminent debut in the country.
Apple Pay has been the subject of much rumor and speculation, with the industry once forecasting that it would be available in Korea sometime early this year.
Last month, the Financial Supervisory Service (FSS) even completed its review of the service’s customer protections and legal compliance.
However, the Financial Services Commission (FSC) — the FSS’s parent organization — announced Tuesday that it had halted the approval process, explaining that it must conduct an additional review before clearing Apple Pay.
“Contrary to reports, Apple Pay is not in the final stage for its rollout,” said a FSC spokesperson. “There’s still a lot to review.”
This comes despite the FSC’s closed-door meeting on Jan. 25 with the Credit Finance Association and executives from Shinhan Card, Samsung Card and BC Card to discuss Apple Pay, a move widely seen at the time as the final step in the payment solution’s long journey to Korea.
The commission is focusing on two issues — whether payment information is at risk of leaking overseas, and supply rebates for card readers.
Unlike other mobile payment systems that support magnetic secure transmission (MST) technology or integrated circuits (IC), Apple Pay requires near field communication (NFC) technology to make payments possible. In particular, it works with only one kind of NFC technology, namely, the EMV standard established by major global credit card companies Europay, Mastercard and Visa.
Payment information from Apple Pay would thus seep overseas through foreign transaction networks, which is currently against the law.
The Personal Information Protection Act forbids personally identifiable information from financial transactions to be transferred overseas, giving financial authorities even more to think about.
NFC card readers are also in short supply, falling short of 10 percent of the domestic market. If credit card companies distribute the card readers to stores free of charge, it could violate the rebate cause of the Specialized Credit Finance Business Act forbidding “unfairly demands that a credit card company pay rewards in return for transactions related to credit cards, or receiving such rewards.”
However, critics say that such hurdles are not high enough to delay Apple Pay’s debut in Korea when other countries seem to be using the service just fine without technological or security issues.
Apple Pay is second only to Visa for payment transactions in the global market last year. Korea and Turkey are the only countries in the Organization for Economic Cooperation and Development (OECD) where Apple Pay doesn’t work.
Some experts speculate that there may be another reason why the service keeps getting postponed, namely, concern that sales of domestic smartphones might fall if Apple Pay — which works only with Apple devices — catches on in Korea.
“If sales of domestic smartphone market fall due to Apple Pay, the government faces more losses than gains,” said an industry insider who spoke under conditions of anonymity. “So the government cannot ignore complaints from the industry.”
However, the FSC spokesperson denied the rumor, saying that the commission was only examining whether Apple Pay “complies with the domestic regulations,” denying that it was “considering the matter from an industrial perspective.”
Complaints from iPhone users have grown louder, with owners of Apple’s phone taking to the internet to demand that the financial authorities move more swiftly to approve the payment solution.
“I think the delay is similar to when the launch of new iPhones was postponed,” an iPhone user told the JoongAng Ilbo. “It’s problematic that only we are blocked from using the service when iPhone users account for 30 percent of Korean smartphone users.”
BY KIM NAM-JUN, LEE JAE-LIM [[email protected]]
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