Image captured from Hyundai Card CEO Chung Tae-young's Instagram post / Courtesy of Instagram

FSC still examining Apple Pay's compatibility with local privacy law

By Anna J. Park

It seems Apple Pay's long-awaited official launch in Korea is expected to take place as soon as next month. Some people estimate that the launch date will be Feb. 8, and here's why.

Hyundai Card CEO Chung Tae-young posted a photo of eight apples on his Instagram account last Friday, with a caption that reads, "Lovely Apple." Many of Chung's Instagram followers interpreted the photo as a message that Apple Pay will launch in Korea on Feb. 8, saying the photo hints at the official launch date of the payment service. One of the replies to the post reads: "This means Apple Pay will be launched on Feb. 8, thank you!"

In addition, Hyundai Card revised its bylaws on electronic financial transactions recently, to take effect Feb. 20. The most noticeable revision to the bylaw stipulates the card company's duty to secure the safety and credibility of electronic financial transactions. Market watchers believe the addition was made to the firm's bylaws, as Hyundai Card attempts to convince local financial authorities of the stability of its infrastructure for financial transactions.

Regarding such anticipations, Hyundai Card has remained tight-lipped as usual. The company has been maintaining a strategy of silence towards the media since last year.

"As to Apple Pay, there's nothing the company can officially confirm," a company official told The Korea Times on Tuesday.

Apple Pay promotional image / Courtesy of Apple

Despite consumers' buoyed expectations over the imminent launch, however, some market watchers express concern that it might take longer. Hyundai Card had originally planned to begin Apple's mobile payment service by the end of last year, but it was delayed due to the financial authorities' review and authorization process.

The Financial Supervisory Service (FSS) completed its review of Apple Pay's terms and conditions in early December which it passed to the Financial Services Commission (FSC), which has been reviewing the payment service's compatibility with the local legal framework.

It's been said one of the key issues holding the top regulator back from swiftly granting the payment service's launch in Korea is whether Apple Pay's EMV contactless mode is in violation of local financial laws. Short for Europay, MasterCard and Visa, EMV is a globally used standard payment that relies on near-field communication (NFC), allowing each payment device's embedded EMV chip and antenna to connect with a reader at a point-of-sale (POS) terminal to make secure payments.

Despite the fact the EMV mode is widely used globally, the technology hasn't been adopted in Korea. A further problematic factor is that the technology is seemingly in conflict with the local financial act that bans individual customers' private data from being transferred to overseas territories. The local laws exceptionally allow individuals' private financial data to be sent overseas under strict conditions, such as proving the necessity of such transfers as well as data security and safety. A relief system for any victims of possible financial accidents also must be prepared in advance, among other conditions. The FSC's related departments are currently in talks with Hyundai Card to resolve these legal problems.

IT powerhouse Korea's blemish?

Even if the FSC approves Apple Pay, another hurdle is the need for a wide dissemination of NFC readers nationwide. As of the first half of 2022, only about 5 percent out of the country's 2.8 million card affiliates have NFC readers. Most of Korea's card-affiliated local shops use magnetic secure transmission (MST) technology.

Korea is the only country among the world's top 10 in terms of GDP size that hasn't yet adopted Apple Pay. Since being launched in the U.S. in 2014, Apple Pay has been provided in more than 70 countries, including Korea's closest neighbors Japan and China.

Against the backdrop, some local payment experts criticize the country's closed stance over adopting a new payment standard.

"While the EMV contactless technology is becoming the global standard, leading a fast evolution of global payment markets, the local offline payment industry is still lingering on MST technology," a local payment expert said, adding that the situation doesn't suit Korea's global reputation as an IT powerhouse.