Last week, the Bank of Korea announced its plans to eliminate coinage from its economy and become a “cashless society” by 2020.
On Dec. 1, bank officials announced they will increase efforts to reduce the circulation of the country’s coins, the highest denomination of which is worth less than 50 cents.
The central bank hopes consumers will exchange their coins for “T-money” cards that can be used to pay for purchases in 30,000 convenience stores as well as transit. According to the bank, South Korea’s high-tech society has greatly reduced its use of physical money with only 20 per cent of transactions using hard cash.
According to Korea Smart Card Corporation, makers of the “T-money” cards, there are more than 15 million “T-money” users who complete more than 43 million transactions a day.
“When we make a 10 won coin, it costs more than 10 won,” Lee Hyo-chan, head of research at the Credit Finance Institute in Seoul, told Financial Times, adding if Korea “goes coinless, it is good for both customers and sellers as sellers will not need to prepare enough coins for their business.”
Economic researcher Kim Seong-hoon agreed the country could “save a lot of cost by not using cash.”
“If we abandon cash, we could see 1.2 percent extra economic growth a year. A cashless society can help us tackle low growth, low inflation and the low-interest environment.”
The concept of a cashless society is being explored by many countries, including Canada.
In September, Moneris Solutions Corporation, Canada’s leading credit and debit card processor, estimated cash purchases will make up only 10 per cent of money spent in Canada by 2030. Compared to 35 per cent of overall transactions in 2014, the 70 per cent decline will coincide with an increase in the use of digital payment technologies (especially among younger Canadians).
Moneris noted consumer misconceptions about the security of mobile wallets and the ability of mobile wallets to digitally store physical wallet contents (including plastic loyalty cards and receipts) are among the factors slowing the transition.
“More Canadians – especially younger ones – are tapping their cards to pay as opposed to inserting them into payment terminals,” said Moneris CPO Rob Cameron. “We’ve seen the number of contactless transactions more than double this year, which is a strong indication that mobile payments are going to see a huge lift.”