South Korea smart cards shipment to grow 6.2 percent

SEOUL, SOUTH KOREA: South Korea's smart cards unit shipment is expected to rise 6.2 percent in 2010, rebounding from last year's slump in demand. By the close of 2010, an estimated 49.6 million units are expected to be shipped, up from 46.7 million in 2009.

Frost & Sullivan industry analyst Navin Rajendra expects shipment growth rates to continue rising till 2015 given the nation's appetite for newer and better technology.

New analysis from Frost & Sullivan, South Korea Smart Cards Market, forecasts the market to grow at a CAGR of 5.6 percent (2009-2015), capping the year 2015 at 7.1 percent year-on-year growth and total smart card shipments of 68.7 million units.

"Despite being one of the most advanced and saturated smart card markets in Asia - besides Japan - and indeed, the world, the country's affinity towards faster and more accurate means of processing is expected to sustain the demand for smart cards as new, multi applications are embedded," Rajendra says.

He attributes the country's progressive ICT consumption and growth in smart card applications, in no small part, to the government's support and ambition for technological sophistication.

South Korea's EMV (Europay MasterCard Visa) mandate was passed in 2005, and again, in 2008. All banking cards issued today are EMV-compliant chip-based cards; majority on a contactless interface. The banking sector is the biggest user of smart cards accounting for 40 percent (18.7 million units) of the total shipment in 2009.

The transit project was also initiated by the government, in 2003. In 2009, pure transit application accounted for 19 percent (8.9 million) of cards shipped.

Rajendra notes that many of the multi-purpose transit cards in use in South Korea - although not included in the 8.9 million - also store e-purse (either debit or credit), online functionality and ticketing capabilities. "The Korean government also allows purchases made on transit cards to be used for individual tax declaration purposes," he adds.

"Pure government applications have todate been limited to e-passports, military ID and government employee ID for some agencies. In 2011, smart card-based government IDs will become mandatory for all government departments, thus driving uptake of cards for government and multi applications further," he says, adding that the national ID project as yet to be implemented.

SIM application is the second largest smart card usage at 33 percent (15.4 million) of card shipments in 2009. Although South Korea's mobile penetration stands at close to 99 percent (2009), Rajendra believes that convergence is the next big thing which is expected to keep smart card SIM shipments in demand.

"Like in neighbouring Japan and Taiwan where mobile services are mature, the mobile phone is seen as the most appropriate form factor for convergence," he says. "3G and 4G phones are hugely popular in South Korea and telcos are already trialing pilot projects to enable NFC (Near Field Communication) and contactless payments."

With contactless payments underway, Rajendra reckons that it is only a matter of time before the mobile phone becomes a commonplace device for financial transactions.

"The introduction of new tools for mobile applications would necessitate higher capacity SIM from the standard 128kb and 144kb currently used in the country," he concludes, adding that SIM capacity upgrades every three years are the norm in South Korea.