Sun, Oct 19, 2003 page11

• Credit-card phone is must-have item

  • AP
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  Kim Won-jung walked up to a vending machine and bought an orange drink. But rather than insert coins, she paid with the press of a cell phone button.

  Kim's Samsung handset has a debit card inside, and pushing its "hot key" beamed the information to complete the transaction.

  "My brother really envies me for all the cool things I do with my phone," said Kim, 22, a math major at the Sookmyung Women's University in Seoul.

  In one of South Korea's latest efforts to establish itself as a technology trendsetter, the country's three telecom giants, major credit card companies and several banks have been working for a year to enable Koreans to pay for everything from groceries to gasoline by cell phone.

  "Korea is far ahead in the use of such technology, and it probably leads the world, not just Asia," said Daisuke Okabe, a mobile phone culture specialist at Yokohama National University in Japan, where phone payment schemes remain largely in trial mode.

  If the technology makes sense anywhere, it's here.

  Almost every teenager and adult has a wireless handset: There are 33.2 million cellular subscribers in the country of 48 million. And unlike the rest of the world -- with a few notable exceptions -- the cell phone is in Korea a lot more than a tool for talking.

  Kids surf the Internet. Parents transfer money. Some play the lottery, others book movie tickets and millions snap pictures.

  So why not make the phone a full-fledged wallet?

  "We are conditioned to think that a credit card is a plastic rectangle," said Cho Eun-sang, a senior manager at Harex Infotech, among the first companies to develop the technology. "But it is actually the data on the strip at the back, and data can be stored anywhere."

  Instead of handing over credit or debit cards that get swiped, users type their passcode on the phone keypad, point the device at a special receiver on a checkout counter and press a key. It's as simple as operating a TV remote.

  The phone shoots the card data in an infrared beam or radio waves. No signature is necessary. For small payments at vending machines, the passcode isn't even required.

  Transmissions are encrypted and secure, and subscribers who lose their phones can get them disabled within seconds by informing the credit-card company.

  Phone owners can apply transactions to either credit or debit accounts.

  An entrepreneur widely credited with spurring mobile payments is Park Kyung-yang of Harex Infotech. He has made millions manufacturing key chains with embedded radio-frequency chips.

  Commissioned in 1997 by US oil giant Exxon Mobil Corp to embed key chains with stored-value radio frequency ID chips so they could pay for gas, Park asked himself: Why restrict them to gasoline fill-ups?

  "I figured a mobile phone was the most logical instrument to place the card in," he said.

  Harex and South Korea's second-largest mobile phone company, KTF, have also collaborated with Sookmyung Women's University to also let students use their phones as identification cards.

  The phone's "hot key" can open doors and parking lot gates on campus, register for courses, borrow books at the library or post notices on the campus Web site.

  Getting the payment-by-phone idea off the ground was not easy. It required cooperation from three industries that don't always see eye-to-eye -- banking, credit cards and telecommunications.

  Park said executives laughed at him when he first approached credit card companies -- with a TV remote strapped to his cell phone to demonstrate how it would work.

  Credit card companies were loath to cooperate so closely with telecoms because that would require sharing valuable customer information and transaction commissions. The card companies figured they already had the entire country in their grip, with an average of four cards issued for every working person.

  But after extended negotiations, they finally agreed, acknowledging the inevitable march of technology.

  The mobile phone companies, on the other hand, were hungry for new services. Their markets were saturated. All three major providers are now on board.

  SK Telecom, the country's largest mobile phone operator, says it has sold 280,000 phone handsets capable of carrying the payment chips -- although only about 30,000 customers have inserted them. KTF says it has sold 400,000 payment-capable phones but has only 20,000 subscribers.

  One encumbrance is the need for each carrier to have card readers at retail outlets. SKT says it has already installed 300,000 card readers at stores and outlets nationwide and expects 400,000 by year's end to cover 75 percent of all payment points in the country. KTF expects to install 300,000 card readers by next year.

  Industry officials acknowledge that they need to market the service better _ and were hampered by bad timing: The launch came as the industry was hit with a US$13 billion wave of defaults that forced companies to stop issuing new cards.

  Mobile phone companies are hopeful that once the crisis is over, customers will flock to the service. A marketing blitz is planned to help spur them.

  Lee Jong-hyun, an assistant manager at SK Telecom's mobile-finance division, envisions cell phones that also contain club memberships, a driver's license, ID card, airline frequent flier card -- essentially everything people carry in their wallets.

  "In the future you only will have to carry one handset," Lee said. "It will be your window to the world."
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