(Yonhap Feature) Need for speed and convenience drives cash out of S. Korea

By Byun Duk-kun

SEOUL, June 10 (Yonhap) -- Less than just 20 years ago, about one in every three South Koreans had a pager. Now the number stands closer to zero than a few thousand. In another 20 years, many others will likely face similar fates, and they might also include cash.

In 1997, the number of South Koreans with a pager peaked at 15 million, marking the world's steepest growth over five years since 1993 when the now primitive mobile communication device became more affordable and a hip trend here.

What came next quickly replaced pagers at a much greater rate than pagers spread originally.

The country's mobile phone penetration rate breached the 100 percent mark in March 2010, and as of March 2015, more than eight out of every 10 South Koreans were using smartphones.

Many say what drove pagers out of the local market, at least in part, was the people's desire for faster and better connection, as well as their high ability or readiness to try new things.

"Unlike in other countries, the public is very IT-friendly. They are quick to adapt to any new technology," said Park Ei-rak, head of the Bank of Korea's (BOK) payment and settlement systems department.

Park and the BOK are confident that the technophilic nature of the South Korean public will also help them adapt to a never-before-heard environment -- a society completely free of coins, not by getting rid of them but by getting rid of the need to exchange actual money.

The central bank has already launched a review on the possibility of transforming the country into what it calls a coinless society, where small change, currently exchanged in coins, will instead be deposited into one's account.

For the central bank, the move is a necessary step to cut costs.

In 2015, the country spent 54 billion won (US$45.23 million) to supply fresh coins, on top of the 90 billion won it spent to print fresh banknotes the same year, according to the BOK.

"We are moving in the right direction in that coins cost a lot to maintain," Park said in a recent telephone interview with Yonhap News Agency.

Park says the move to become a coinless society is not a step toward a cashless society.

However, the central bank official agrees that the country is already moving in that direction.

"Without any effort, we are moving fast toward spending less and less cash. With large increases in the use of credit cards and mobile payment methods, we are already transforming into a society that spends less cash," Park said.

Cash continues to remain one of the most preferred methods of payment in South Korea. But it is neither the most commonly used method nor the most frequently used one.

In 2015, payments made by credit cards alone accounted for 39.7 percent of the total, surpassing those made by cash at 36 percent, while payments made with debit cards and prepaid cards together accounted for 20.1 percent, according to the BOK.

The use of both credit cards and mobile phone-based payment methods seems to have nowhere to go but up, especially with the growing number of mobile credit cards issued that combine the benefits and conveniences of the two.

Cash is also giving away its No. 2 spot to online payment methods.

As of end-March, the number of Internet and mobile phone-based banking service users came to 119.8 million, more than twice as many as the country's overall population at about 50 million. The average amount of transactions processed through internet and mobile phone services also spiked 9.7 percent on-year to 41.23 trillion won, or $34.72 billion, per day.

Other signs of people using less and less cash are becoming apparent.

In 2015 alone, the country's 13 major banks shut down 165 of their branches or representative offices throughout the country, largely due to a decline in the number of visitors to those offices.

"A drop in the number of visitors to a branch office means a rise in the average cost of physically handling each transaction, which in the long run could translate into a rise in fees for all customers," an official from Woori Bank said, speaking on the condition of anonymity.

"Reallocating resources to online security and better services is not just a matter of reducing costs, but a matter of maintaining our competitiveness and survival, especially under the fast-changing environment where online service users already far outnumber offline customers," he added.

Woori Bank alone shut down 37 branch offices in 2015. Together, the 13 local lenders are again expected to close a combined total of 100 branches or more this year.

Banks are also reducing the number of automated teller machines (ATMs), apparently as more and more people have online access to services that were once available only at banks or ATMs.

The 13 local banks reduced the number of their ATMs by 500 from a year earlier to 45,556 in 2015.

Jung Yeon-joo, 39, says using credit cards is not only more convenient but also more profitable than using cash.

"When I use cash, I usually end up with a pocketful of change. When I use credit cards, I do not have to worry about having a pocketful of change or if I have enough cash to make a purchase," the office worker in Suwon said.

"Besides, credit card firms give you special points that can be used just like cash, whereas using cash gets you nothing," he added.

Also with no need for cash, Jung says he rarely needs to visit a bank.

"I have not actually been to a bank for over a year now, and I do not think I will need to in the future because I can even open up a bank account online and pretty much do anything else I need to," he said.

The last time he had to make a trip to a bank, Jung remembers, was when he needed to transfer a large sum of money that exceeded the daily limit he had set at 1 million won.

Very soon, a trip to a bank will no longer be necessary even when transferring large sums of funds as the BOK is already moving to raise the limit to over 1 billion won from the current 100 million won.

bdk@yna.co.kr
(END)