Apple Pay, currently only available through Hyundai Card here, is set to expand its reach in the Korean market by forging partnerships with major financial groups to offer the service as early as next month.
With the move, the US tech giant is expected to cement its presence, some are concerned high fees it charges to local card issuers amount to unfair treatment towards the Korean market.
According to industry sources on Sunday, Apple is in the process of finalizing partnerships with Shinhan Card and KB Kookmin Card, potentially ending the exclusivity Apple Pay has had with Hyundai Card since its launch in Korea in 2023. Once the new partnerships are established, consumers will have more options to expand use of the world's most popular digital wallet service in Korea, marking a milestone in the expansion of Apple Pay in the country.
However, the relatively higher fees for local card issuers here remain a sticking point. Apple reportedly charges a 0.15 percent transaction fee per payment from local card issuers, significantly higher than fees in other regions. For example, Israel’s fee stands at 0.05 percent, while China’s is 0.03 percent, making Korea’s fees up to five times higher.
Adding to the financial burden for local card issuers, Apple Pay transactions in Korea rely on the global Europay, Mastercard and Visa payment standards rather than local payment networks. This method requires card issuers to cover additional costs for token issuance fees to international payment networks.
By contrast, Samsung Pay, which currently dominates Korea’s mobile payment market, has maintained a zero-fee policy for card issuers. Despite initial speculation originally that Samsung Pay might introduce fees following Apple Pay’s arrival, Samsung Electronics extended its free service policy, citing its commitment to nurturing the local payment ecosystem and fostering cooperative relationships with card issuers.
Industry sources warn that should fee-based services become the standard, Samsung Pay may eventually follow suit. “Samsung Pay’s wide adoption is tied to Samsung smartphones, which have an 80 percent market share in Korea. If Samsung Pay begins charging fees, the financial strain on card issuers could grow exponentially,” said an industry source who requested anonymity.
A Samsung Electronics official said, “If all card companies adopt Apple Pay, it will be challenging for us to continue offering free services. We are closely monitoring developments.”
This is not the first time that Apple has been engulfed in controversy over its pricing policy in the Korean market. The US tech giant has in the past faced criticism for pricing iPhones higher here compared to neighboring countries like Japan and China. For example, the 128 gigabytes iPhone 15 were launched in Korea in 2023 at prices more than 100,000 won ($69.90) higher than in Japan or China. Korea was not part of Apple’s first-tier launch markets for over 15 years, only joining the ranks with the iPhone 16 last year.
As Apple Pay’s adoption grows here, some market watchers are expressing concerns over its potential to disrupt the local payment ecosystem. When Apple Pay was first introduced, the Financial Services Commission approved its launch on the condition that associated fees would not be passed on to merchants or consumers. However, the increasing number of card companies adopting Apple Pay, and the accompanying rise in costs, could potentially result in cardholders reducing their benefits or to higher merchant fees.
“Apple’s high fees could result in reduced benefits for consumers as card companies struggle to offset costs,” a market expert who requested to be anonymous said. “If card issuers increase merchant fees to recover their margins, the financial burden will inevitably trickle down to the end users.”
yeeun@heraldcorp.com
