Apple’s arrogance angers Korean card issuers
Apple’s high-handed attitude toward Korean credit card issuers has been leading to a reduced likelihood of Apple Pay’s South Korean launch, as card firms have declined to accept the U.S. tech giant’s unreasonable demands.
According to the sources, some domestic card firms recently stopped negotiating with Apple for the launch of the U.S. firm’s mobile payment and digital wallet service.
The card issuers have tried to bring Apple Pay to Korea since its launch in 2015.
Some of them recently visited Japan to study the usage of the mobile payment service there.
They regarded Apple Pay as their new income source for this year, hoping it would allow them to overcome the industry downturn.
However, they failed to reach an agreement with Apple because the tech firm wanted them to pay transaction fees and install payment terminals for Apple Pay.
Apple receives 0.15 percent commission on every Apple Pay transaction in the United States.
According to the sources, it demanded Korean card firms pay a higher commission than those in other countries.
In contrast to Apple, Samsung does not receive commission on Samsung Pay transactions.
“Apple and card firms pursued a partnership, but it ended in failure as Apple set higher commission rates in Korea,” a domestic card firm official said on condition of anonymity. “Card firms have already suffered losses from their customers who use credit cards for micropayments. If transaction fees go higher, this will weigh more on card firms.”
The sources said Apple also demanded Korean card firms provide their affiliated merchants with devices needed for Apple Pay.
Most merchants here use payment terminals for integrated circuit (IC) cards, not those based on the near-field communication (NFC) technology that Apple Pay uses.
Samsung Pay has been available in Korea and it uses both NFC and magnetic secure transmission (MST), allowing the payment service to work with older terminals.
In Korea, only 30,000 among 2.8 million merchants affiliated with card issuers support NFC-based payments.
Local card firms have remained reluctant to install NFC-based terminals, as it costs at least 150,000 won ($123) per terminal.
They once jointly pushed ahead with the installation of NFC-based terminals in 2017, but the nation’s financial regulator prohibited it, saying it may go against the Specialized Credit Financial Business Act that is in place to prevent card issuers from bribing their affiliates.
“Apple officials met with Korean credit card firm officials when they visited here to promote Apple Pay, but it was virtually impossible for card firms to install hardware tailored for Apple Pay,” another domestic card firm official said.
Apple declined to comment on Apple Pay’s launch in Korea.