When it comes to technological innovation, South
Korea ranks alongside Japan as having one of the most innovative
payment industries in the world. Now, a group of major card issuers
are looking to replace debit cards with mobile phones following the
launch of what is being described as a ‘one-touch, one-chip’ mobile
payment service.

South Korea: value of mobile banking transactionsSouth Korean telecom company
KTF is launching a password-protected mobile payment service called
UbiTouch, which will allow customers of 16 South Korean banks to
use their 3G phones to withdraw money by touching them to one of
the 39,000 ATMs across the country bearing the UbiTouch marque.
Customers can register multiple accounts to a USIM (universal
subscriber identity module) chip within their phone and make
withdrawals, and also conduct balance enquiries, ATM deposits and
money transfers.

Multiple accounts, multiple

KTF has developed the service in
conjunction with the 16 banks involved and with the Korea Financial
Telecommunications and Clearing Institute. UbiTouch allows
customers to select an account from a maximum of 100 for mobile
banking transactions, and also allows users to perform telephone
banking transactions by attaching a dongle (a contactless-enabled
transaction reader) to their mobile phones, enabling customers to
use it as a debit card.

Major South Korean banks such as Kookmin,
Woori and others such as Korea Post have all signed up for the
service and have already adopted it, with other banks planning to
follow suit in the first half of 2009. Only Shinhan Bank has yet to
take up the UbiTouch service. Major telecom companies, SK Telecom
and LG Telecom are planning to adopt the service in the near
future. It is anticipated that the service will be in operation at
every bank in South Korea by the latter half of 2009.

Mobile payment

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South Korea: ATM withdawalsThe roll-out of UbiTouch represents a significant
breakthrough in the South Korean mobile payments space, as
previously it was only possible to have a single bank account
registered to a USIM chip. Customers with multiple bank accounts
which allowed mobile banking had to insert different chips for
different banks and accounts into their phones.

But the usage of USIM is gaining traction
rapidly, following a September 2008 announcement from the
Subcommittee on Financial Digitisation at the Bank of Korea that it
would be promoting the usage of USIM in this manner. USIM allows
multiple functions such as user authentication, global roaming and
electronic transactions to be combined on one card and integrated
into a 3G mobile phone.

Bank of Korea statistics reported in
November 2008 stated that the number of financial institution
customers registered for mobile banking is around 7.8 million, an
increase of around 90 percent over the last year.