To card companies, Apple Pay is a presence like "a chicken rib." The term "chicken rib" originates from a tale in which Cao Cao, during the Three Kingdoms period in China, said about the battle with Liu Bei over the Hanzhong territory, "the profit gained from Hanzhong is not great, but it feels a waste to hand it over to Liu Bei completely," comparing it to chicken ribs. The same applies to Apple Pay in the domestic market. It is a service that attracts the attention of the entire nation, but the contribution to revenue is not as great as expected. There is also the burden of paying double fees. However, from a long-term perspective, it is not easy to simply give up on Apple Pay.
Currently, major card companies Shinhan Card and KB Kookmin Card are reported to be preparing to partner with Apple Pay. Even after the introduction of Apple Pay by major companies, its immediate impact on the card payment market is expected to be small. The Financial Supervisory Service recently reviewed scenarios for the proliferation of Apple Pay, estimating that if Shinhan, KB Kookmin, and Hyundai Card provide Apple Pay services, the annual transaction amount from Apple Pay would be tentatively calculated at around 7 trillion to 8 trillion won. Compared to the total payment amount of 856 trillion won for personal and corporate cards from eight card companies last year, this is less than 1%.
The performance of Hyundai Card, the first partner company for Apple Pay in the country, is at a fledgling level. According to data from lawmaker Lee In-young, the total payment authorization amount through Apple Pay at Hyundai Card last year was 2.0097 trillion won, which is only 1.1% of the total payment authorization amount of Hyundai Card (185.6564 trillion won). The merchant fees earned by Hyundai Card from Apple Pay are estimated to be around 34 billion won, which is about 0.9% of Hyundai Card's revenue (3.9638 trillion won) last year.
Moreover, card companies bear the burden of double fees every time a payment is made through Apple Pay. It is reported that Hyundai Card pays 0.15% of the Apple Pay payment amount to Apple. Separately, it is said that they pay Visa or Mastercard 2 cents (about 30 won) for each transaction made via Apple Pay. Considering the payment amount and the number of transactions for Apple Pay at Hyundai Card, it is estimated that about 6.9 billion won in fee expenses were incurred last year.
The card industry is also well aware of the chicken rib-like characteristics of Apple Pay. Therefore, most card companies preparing to adopt Apple Pay do not expect significant short-term revenue. However, the card industry secretly hopes that in accepting Apple Pay, the domestic card payment environment will change to be more like the global standard.
Apple Pay transactions are processed through contactless payments using the international card payment standard EMV (Europay, Mastercard, Visa). The proportion of domestic card merchants that support EMV contactless payments is around 10%. Some in the card industry argue that since major global financial companies are expanding their businesses based on EMV contactless payment technology, EMV contactless payments should also spread domestically. There is an opinion that this can prevent the "Galápagos syndrome" of the domestic payment market, especially if partnered with a globally influential service like Apple Pay. Jeong Tae-young, vice chairman of Hyundai Card, said in a meeting with reporters last year regarding the reason for adopting Apple Pay, "We suggested entering Apple Pay to derive from EMV."
Of course, as corporations, card companies do not ignore profit and loss calculations altogether. For card companies, Apple Pay is a long-term plan looking into the distant future. Among those in their 20s in South Korea, 64% use iPhones, indicating a particularly high usage rate among this age group compared to all generations. Among iPhone users, there is a clear "lock-in effect." From the perspective of card companies, they are hoping that as the current 20-somethings continue to use iPhones, their consumption capacity will increase in the future. A card industry official noted, "The immediate contribution of card sales from those in their 20s may be small, but considering the distant future, hurrying the adoption of Apple Pay is not unreasonable."