Going Cashless at the Point of Sale: Hits and Misses in Developed Countries is the latest CGAP Technology Program paper in which Ignacio Mas and I analyze six instances of electronic money initiatives in the developed world. We hoped that these experiences would provide us with insight into what to do and what not to do with similar initiatives now being attempted in many developing countries around the world. The last post in this series looked at the first scheme under the category of mobile operator-faciliated payment instruments (Mobipay). Now I have taken an excerpt from the second such scheme, Moneta.

SK Telecom (SKT) belongs to the third largest chaebol (conglomerate) in Korea. SKT controls around half the market for mobile telephony, with 20 million customers. It has developed a comprehensive framework for mobile payments (Moneta), mobile banking (Mbank), and mobile commerce. Moneta was launched in November 2002 as a mobile wallet application that allowed customers to make proximity (in-store) payments through several mechanisms. Moneta initially supported a mobile cash payment product (Moneta Cash) and evolved toward a platform to support credit card payments through mobiles.

SKT pioneered mobile payments in Korea with a mobile cash (m-cash) product, NeMo (Network + Money), which was launched alongside nine major Korean banks in 2001 and was subsequently rebranded Moneta Cash. Customers subscribing to Moneta Cash got a virtual money account, with their phone number acting as their account number. M-cash account balances were maintained in an SKT server (i.e., not on the card), with SKT keeping the float.

Moneta Cash attained three million registered customers by 2004. Over time, tension arose with participating banks that increasingly saw SKT’s m-cash accounts as an “invasion of an outsider into their business domain” (Oh et al. 2006). In 2004 sensitive customer data became accessible through the Internet and was used illicitly. Although SKT claims it was not a technical problem but rather inadequate care by certain customers in protecting their security information, Moneta Cash was discontinued following this incident.

Mobile-enabling credit card payments

Unlike Mobile Cash, which gave customers a new type of account, Moneta itself was not a payment instrument but rather a mobile wallet application that allowed customers to pay using their credit card over mobile terminals. It worked with a new type of chip-embedded Moneta Card (a credit card in a smartcard format). Moneta cards were launched in September 2001 and were initially co-branded by Visa and issued by five major domestic credit card companies and banks.

Over time, SKT has expanded its Moneta payments services from the merchant proximity payment service (Moneta Card) to online payment services (August 2003) and mass transit payments (Moneta Pass) in Seoul. In addition, it has used the payment platform to offer m-shopping, m-banking (Moneta Bank or MBank), and m-stock trading (Moneta Stock Trading) services.

By the end of 2003, SKT had placed some 400,000 dongles with merchants. Moneta still had only 40,000 users, despite the 400,000 Moneta-compatible handsets available (Wallage 2003). Moreover, only 21 percent of registered users had made any purchase using their handsets. As of February 2007, there were 1.5 million registered users of Moneta services in Korea (Payment News 2007), and 80 percent of new third-generation-capable phones had the credit card functionality enabled. But according to uncorroborated sources, use is very low, and the future of Moneta is uncertain.

Moneta is fundamentally a new technology for paying from credit card accounts. With Moneta, SKT sought to simply mobile-enable the preexisting payment ecosystem. Yet despite this apparent “simplification” of the mobile money innovation, Moneta has experienced relatively low levels of use in a population that is among the most tech-savvy in the world. Driving adoption of a new way of presenting and exchanging credit card information has proven difficult for three main reasons.

1. Utility. From the customer point of view, it is not apparent what problem Moneta is addressing relative to standard credit card payment arrangements. At its most basic, Moneta simply physically combines the mobile phone with the credit card. How much of an advantage is that really? In a world where people still carry cash and hence wallets, what is the compelling customer benefit from transferring the credit card from inside the wallet to inside the mobile phone?
2. Technology lock-in. In the absence of industry standards, market participants may chose to delay adopting new technologies until clear winners emerge.
3. Distrust from financial institutions. The development of m-payments was hampered by very public bickering between leading banks and telecoms and the consortia they formed.

You can read about the other cases we analyzed in this paper here.