Moving Towards a Cashless Society in South Korea

Somewhere in the not too distant future, you will no longer see the Korean won. It will become something strange your grandparents still hold on to and give you during the Korean holidays. The younger generation will not know what to do with it. During this time cold hard cash will disappear. What will replace it? Digital currency. Seoul will start to experiment with digital currency with its S-Coin. However, that will only be the start of moving towards a cashless society in South Korea. 

Are we in a Cashless Society in South Korea now?

Cashless Society in South KoreaSome might say Korea, and especially Seoul has already become a cashless society. Korea has an almost 100% smartphone adoption rate. Payments with your mobile phone or credit card are at an all-time high. If you walk into a Starbucks in Korea and it is very possible they will not accept cash. However, if you compare Korea to China, Korea is still a few years away from going cashless. 

Here are the sad truths about physical money. Physical money is an issue not only for the citizens but for the governments themselves. The Korean government has to spend billions of dollars just to print and mint Korean currency. Then they have to run an infrastructure that transports these currencies in armored trucks to banks by trained security guards. Then the currency needs to be sorted and stored in a secure vault. It is estimated that operating in cash will cost Korea around $7 billion a year. You would think this cost would be enough to motivate the Korean government to move to a cashless society as quickly as possible. However, this is not the main reason.

The main reason to move to a cashless society in Korea is that Koreans want it. There is a growing demand form the younger Korean generation that is looking for fast and easy ways for payment. 

How the Korean Government will Benefit

Moving to a cashless society is not just great for the young tech generation in Korea. The Korean government would benefit as well. Not only will they save a tremendous amount of money, but they will also be able to monitor tax evasion and fraud. Digital currency solutions will make it so that every payment is recorded and every transaction is logged. Doing your taxes in Korea could end up being as simple as pressing a few buttons at the end of the year. 

How Koreans will Benefit

Korea already has the infrastructure to easily transition into a cashless society. Koreans all have debit or credit cards, apps, online banking, and other cashless payment options like Kakao Pay or Toss. Moving to a cashless society will mean that Koreans will now be fully able to track their finances. Every transaction will be recorded and Koreans will be able to have access to every aspect of any particular transaction. In addition, moving away from cash will mean that there will be more secure. Cash can easily be stolen and it is very difficult to get it back. Credit cards, debit cards, and other payment options have protections in place to prevent users from losing their money to frauds or scams.

The Risks of Moving Towards a Cashless Society

South Korea Cashless SocietyTo every innovative solution, there are of course downsides. With everything you buy being recorded, you will end up losing some privacy. Just because South Korea is a democratic country, doesn’t mean people in Korea shouldn’t be concerned about the Korean government having so much data on their citizens. Harvesting personal data can be very profitable not just for the Korean government but for companies as well. However, the biggest downside is, of course, cyber-attacks and hacking. Just as it is hard to stop bank robbers in real life, it is just as hard to stop cyber-attacks as well. Not only can digital currency be stolen but personal data can also be hacked.

Credit card companies have faced these kinds of hacks for years. Even cryptocurrency exchanges in Korea have had their funds stolen. Data breaches are a problem because the thieves are more sophisticated than the companies trying to stop them. You only need to succeed once as a hacker while companies need to protect themselves from all kinds of possible attacks. 

Gradual Shift to a Cashless Society is Key for South Korea

South Korea loves to embrace new and innovative technology and is aggressive in implementing said technology. However, becoming a cashless society should be a gradual process. While the younger generation in Korea is used to virtual payments, there are still millions of older generation Koreans that rely on physical cash. Some still go to their nearest Korean bank to pay their bills. Those that will suffer the most from a quick shift to a cashless society in Korea will be the poor and the elderly. Therefore it is important to make sure no one gets left behind. 

Korean Banks are Getting Ready for a Cashless Society in South Korea

Korean banks have started to embrace Blockchain technology. There will come a time when countries in South Korea develop their own digital currency as a replacement for their national currency. So where does that leave cryptocurrencies like Bitcoin? We saw a big clue about what happened with Facebook’s Libra. The government with the pressure from banks was threatened by it and currently, it is in a state of limbo.

The move to a cashless society will happen at some point in Korea, the real question is which form of digital currency will win out in the end? The Central Banks or existing Cryptocurrencies? If history has anything to say, the Central Banks will lead the way. This is why Korean banks have been spending millions of dollars in research and development of Blockchain technologies over the past few years. No matter what happens it is important that we educate ourselves and be prepared or else we could get left behind.