Travel cards that don't require currency exchange are now a must-have for overseas trips. Financial companies that offer travel cards range widely, from commercial banks to card companies. But the corporations that first introduced this concept of a foreign-currency prepaid reloadable card in Korea was the Fintech corporations "Travel Wallet."
Despite the many latecomers, Travel Wallet's market share has not declined. As of the first half of this year, the number of cards issued surpassed 8 million, the cumulative transaction amount reached 6 trillion won, and on the previous month it was selected as a preliminary unicorn corporations. But Chief Executive Kim Hyeong-u of Travel Wallet said, "Foreign-currency payment is the No. 1 contributor that made today's Travel Wallet possible, but the company began looking for new revenue streams three years ago."
The three core businesses that Travel Wallet is now focusing on are B2B (business-to-business transaction), overseas expansion, and stablecoins. It plans to sell the payment data it has accumulated as a payment corporations to other payment corporations, expand the Travel Wallet business overseas, and pioneer the stablecoin payments market.
In particular, Kim argued that an era of paying with stablecoins around the world is not far off and that Korea should move a bit faster to establish regulations and infrastructure. Korea, in particular, has strict regulations on new technologies and worries about potential problems, but Kim said technological progress can be achieved only by going through trial and error. The following is a Q&A with Kim on the 28th of the previous month at Travel Wallet's headquarters in Gangnam District, Seoul.
—Even though the travel card market has become a red ocean, you still have a solid base of supporters. What is Travel Wallet's unique strength?
"We are banking heavily on the networking effect. Beyond currency-exchange payments, the feature that generates a lot of transaction is foreign-currency remittances between friends. It lets people on a trip settle leftover pooled funds in the local currency on the spot, which can prompt those not yet signed up to join.
Also, a service called "N-bbang payment" is increasing new inflows. Unlike the commonly used Dutch pay (split-the-bill) that requests settlement after a payment, it enables each person's card to be charged in real time on the spot. In addition, in-app travel community services and more seem to set us apart from typical travel card providers."
—We hear you're preparing to leap forward as a digital wallet rather than focusing on the travel card business lately.
"A digital wallet is a digital wallet that does not rely on the bank accounts we use every day and enables various forms of payments, encompassing multiple currency and even virtual assets. Compared with opening a new account, signing up for a digital wallet is easier and simpler, and users face a lower psychological barrier.
A technology called Blockchain is used in digital wallets, but users don't need to know that. They just need to know it is convenient and inexpensive. Through this, I expect everyone will use digital wallets instead of bank accounts and will send money and make payments through wallets. The concept of a digital wallet may feel unfamiliar; just think of China's Alipay."
—There is a lot of skepticism about digital wallets and stablecoins. Why are you so confident?
"Expense. Within a single bank, transfers are easy and free, but the moment money goes to another bank it passes through the Korea Financial Telecommunications and Clearings Institute, and sending it overseas incurs costs. But if stablecoins take hold, remittances become possible in real time at no expense or at low expense.
In China, more than 1 billion people use Alipay. The reason Alibaba, which began as a commerce platform, was able to expand Alipay so quickly in such a short time was that fast, real-time payments at no expense were possible."
—Is there a reason for retailers to accept digital wallet payments?
"Even more so. First, I believe digital wallet payments will spread further in overseas markets. For example, when a Japanese person comes to Korea and pays by card, about a 3.5% fee is charged to both the payer and the merchant. In Korea, card fees are low so people may not notice, but international payment fees are very expensive abroad. But if the payment is made with stablecoins, both sides can save 3.5% each. In the payments market, a margin of more than 3% is the threshold that moves people.
There is also an incentive for merchants in domestic payments. Card fees for large merchants are around 2%, and for small shops about 0.8% to 1%. You might think 1% is nothing, but those small shops have operating margins below 10%. If a retailer earning 7% to 8% gives up 1% to 2% in card fees, that means 20% to 30% of operating profit is taken. If this becomes free, retailers' operating profit rises significantly. There is no reason not to use digital wallets."
—What about security issues?
"Have you ever seen news of hacking incidents at Kakao Pay or Naver Pay? Banks have incidents every year. As traditional financial institutions, banks have adopted structurally old systems. It's a method called on-premise (a method in which corporations build and operate their own IT infrastructure such as servers and software), and in short, because it runs the old-fashioned way, there are gaps, and upgrading the system takes more time and expense.
But most pay systems recently use the cloud model. Developers are continually advancing the cloud approach and seeking solutions that address the cloud's drawbacks. So you could even say it is safer."
—The financial authorities and the Bank of Korea say they should approach digital assets and payments with caution.
"It is natural to have resistance to new technology. There can be trial and error. But if we reject or hesitate to adopt the technology, we will again lose sovereignty and become dependent on other countries. I fully understand the areas of concern for the authorities, but if they listen only to the authorities and exclude voices from the field, history of dependence will inevitably repeat itself. Dollar stablecoins are already used worldwide, and each country is preparing stablecoins based on its own currency. Even Japan, which is more conservative than us, has introduced a stablecoin linked to its national currency. Korea now stands at a crossroads as to what position it will take in the global financial industry."