By Richard Giedroyc
Coins appear to be on their way out in South Korea. According to Hawaii Public Radio HPR2 “Today’s Asia Minute” reporter Bill Dorman, the Bank of Korea is reducing annual coin mintages, with the intention of entirely eliminating metal coins by 2020.
In an April 16 broadcast Dorman said, “The plan is that consumers who pay cash at retailers would receive their change in credit – either on a credit card or a mobile bank account or maybe even a transportation card.”
Dorman continued, “Elsewhere in Asia some countries already use only paper money – including Cambodia, Laos, Myanmar and Vietnam. Thailand is trying to convince them to go the other way – pointing out that coins are much more durable than currency notes.”
Dorman didn’t address the future of South Korea’s bank notes, but in an April 15 article, The Korea Herald newspaper did. According to the newspaper, “A cashless society is fast becoming a reality in Korea. Cashless transactions here have already overtaken those made with notes and coins. Koreans use cash for just 20 percent of all payments they make.”
The article continues, “There was a time when credit cards were considered a social evil after the nation suffered the credit crisis of the early 2000s. Companies over-issued credit cards and binge spending was prevalent, with more than 4 million people delinquent at the time. But now the social taboo has gone. Instead, credit cards have continued to transform along with the growing trend toward electronic money. Banks and card companies are turning their eyes to mobile payments services, competing head-on with tech companies.”
A recent Bank of Korea survey indicates the average Korean carries about 74,000 won valued at about $65 US in cash, but they also carry two credit cards, and only withdraw cash from Automated Teller Machines about three times per month. Almost 80 percent of all payments are made by card. In Sweden people only use cash in about six percent of all transactions. Denmark has similar statistics to that of Sweden. About 47 percent of transactions in the United States are still made using coins and bank notes.
Perhaps South Korea will do away with its physical currency, but what about KOMSCO, the Korea Minting, Security Printing and ID Card Operating Corporation? KOMSCO is a state-run company headed by Kim Hwa-Dong. Kim explained to The Korea Times newspaper on April 17 that “he is seeking new revenue sources to cope with the low local demand for bank notes as more and more people use credit and debit cards for payments.”
KOMSCO currently prints bank notes for India, Indonesia and Peru. China is a past customer but has recently developed its own security printing technology.
The concept of a cashless economy is gaining ground worldwide. The Indian Link blog (originating from India and addressing Australian readers) chimed in on April 11, saying: “With your cell phones holding all your money, no need for bank buildings. They are boarded up in most country towns anyway. Even in my inner city suburb all the four major banks, branded as the four pillars of our economy, have closed their branches. With no bank buildings there won’t be any bank robbers or bank managers. Can’t tell the difference between them these days! ATMs too, are predicted to disappear. To survive the cashless era churches in Sweden and Denmark have installed card readers. Rich in their imagination, beggars will discard their bowls and thrust a cell phone at you so you can seamlessly transfer your generosity.”
On April 15 the publication Daily Life editorialized, “Cash is king, the old saying goes. Well, it’s time that particular monarch was overthrown. How is it that in 2016, when we carry the Internet in our pockets, we still conduct transactions by exchanging brightly-colored pieces of plastic with numbers written on them? And how is carrying a jangling bunch of metal coins around in any way efficient? Coins and notes were useful instruments in their day, but that day is over.”
Not so, says the British tabloid The Telegraph. On April 18 an article appeared in which it reads: “The co-operative research revealed that shoppers are rejecting tap-and-go technology for payments over 10 pounds in favor of less convenient but ‘safer’ payment methods such as inserting their cards in chip-and-pin machines. The main reason for shoppers’ reluctance to use contactless technology for larger payments is a lack of trust in the devices as soon as the spend gets into double figures.”
The April 16 British publication Business Standard is more pragmatic than most, taking a practical rather then emotional view of what is trending. According to Business Standard, “Research by international payments industry expert Guillaume Lepecq, however, shows that the demand for bank notes and coins has continued to grow at a significant pace around the world, in parallel with electronic payments.”
The article suggests “The process [of going cashless] is driven by commercial banks and payment service providers rather than governments or central banks,” continuing, “on the one hand we have cash that is a public good, owned by society as a whole. On the other hand, we have private business interests that are promoting alternatives to cash. They have an interest in shrinking the market share for cash and are promoting themselves aggressively.”
The British publication pointed out that, “In Belgium the entire card payment system broke down the day before Christmas, so those doing their last-minute Christmas shopping had to rely on cash payments exclusively. In fact, if you want examples of cash-less economies, you have Panama, which has no central bank and uses the U.S. dollar as a currency. Or Zimbabwe, which ceased printing bank notes in 2009 because they had lost value following an extended period of hyperinflation!”
The Business Standard article also emphasized that according to the Gemalto Breach Level Index, more than 1 billion personal records were compromised in 2014, this being a 78 percent increase from similar activity during 2013. Are the South Koreans reading this? The North Koreans likely are!