Apple’s broad financial services unlikely to enter Korea near term: Report

Apple Inc.’s payment service Apple Pay [Photo provided by Apple]

While Apple Inc.’s payment service has already been launched in many countries, including South Korea, the U.S. tech giant may face challenges in the short term for the potential entry of other financial services into the Korean market, according to a report from the Bank of Korea on Monday.

Apple has been steadily expanding into the financial services sector with its suite of products including Apple Pay, Apple Cash, Apple Card, Apple Pay Later and Apple Savings Account. For Apple to enter the Korean market with these financial services available mostly in the U.S., legal and institutional barriers must first be resolved, the report said.

According to the report, Apple offers multiple financial services in partnership with existing financial companies.

Apple Pay, a contactless payment service using iPhones and NFC terminals at merchants, was launched in 2014 and is now the No. 1 global payment service. It was introduced in Korea in March in partnership with Hyundai Card Co.

Apple Cash allows users to make payments with Apple Pay for online and in-app purchases and person-to-person transfers through the account balance at a partner bank. Apple Card is a credit card issued by Goldman Sachs Bank USA, an Apple partner, that powers the iPhone Wallet. Apple Pay Later was launched in March as a buy now pay later (BNPL) service that allows users to split purchases into four payments spread over six weeks with no interest or fees. Most recently, in April, Apple partnered with Goldman Sachs to launch Apple Savings Account, a savings account available only to Apple Card users.

[Photo by Park Hyung-ki]

The report said that these Apple financial services are unlikely to enter the Korean market in the near term due to legal and institutional barriers. In addition, while Apple Pay is available globally, the rest of Apple’s financial services are only available in the U.S.

For Apple Savings Account and Apple Pay Later to be available in Korea, they would need to be designated as innovative financial services, as has been the case for similar services by Korean companies.

For Apple Cash to be available in Korea, Apple is required to register as a prepaid electronic payment instrument issuer under Korea’s Electronic Financial Transactions Act, as it has a simple payment service structure such as purchasing goods and services through prepaid charges.

However, in the case of Apple Card, as various private label credit cards (PLCCs) are already popular in Korea and Apple Pay combined with a domestic credit card has already been launched, it is possible for Apple Card to enter the local market by partnering with Korean card issuers, the report said.

Apple is also expected to face competition from domestic rivals such as Naver Corp. and Kakao Inc., which already offer services like Apple’s financial services, but as in the case of Apple Pay, Apple could gain a significant share of the Korean market due to the high preference for iPhones among the younger generation, according to the report.

The report also pointed out that if global big tech companies such as Apple enter the domestic financial industry in earnest, there will be growing voices for more regulations against big tech-related issues such as financial stability risk, monopoly and weakening financial consumer protection.

At the same time, the report said, the local banking sector, which claims reverse discrimination in regulation compared with big techs, may demand the relaxation of the current separation of banking and commerce.