Finance, Internet Firms Push for Cyber Cash Project

Finance, Internet Firms Push for Cyber Cash Project
By Yang Sung-jin
Staff Reporter
Korea Times
May 25, 2000
Cyber cash, or the electronic transaction tool for e-commerce and Internet business, is deemed crucial for the growth of the Internet industry at large.
But what's more important is that companies and financial organizations see the e-money project to boost their market positions and increase revenues as the country embraces digitization.
On the financial front, the Korea Financial Telecommunications & Clearance Institute (KTCI)[KFTC], Mondex and Visa are pushing for cyber cash systems with different specifications.
KTCI plans to float its K-Cash testing service this year, while Mondex and Visa have already unveiled their initial version of cyber cash.
K-Cash adopts password systems endorsed by security authorities here for Korean currency only transactions. Major commercial banks and credit card companies stand behind KTCI's standardization initiative.
Mondex and Visa, meanwhile, base their systems upon U.S. password standards for the global network.
Mondex's cyber cash is already undergoing a testing phase in Britain and the United States. In Korea, Mastercard Korea and Kookmin Bank plan to set up Mondex Korea before launching the testing service in concert with Hanyang University.
The Mondex system simplifies the transactions among member companies, while allowing multiple cyber currencies to join the network. It is also compatible with existing credit cards including Europay, Mastercard and Visa.
VisaCash, developed by Visa International, is also being tested in the U.S., Japan and Britain. Samsung Corp., a general trading unit of Samsung Group, and Visa International are jointly speeding up the cyber cash project here.
The system is a so-called open system which is widely compatible with other currencies and credit cards. Particularly, it will be based on CEPS (common electronic purse specification), a standard which is emerging as the mainstream cyber cash in Europe.
K-Cash, Mondex and VisaCash share a common ground in that all three systems are basically IC (integrated circuit) cyber cash and yet they differ on specific compatibility and system details.
The different systems, however, are expected to be streamlined under a unified standard as the newly-launched forum of 36 cyber cash players begins today.
Meanwhile, Samsung Corp. is eyeing the electronic money market in concert with Visa International, a global credit card company.
Currently, 15 companies including KT Freetel, KT Hitel, Samsung subsidiaries, Lycos Korea and SBS Internet have expressed their desire to join the cyber money project pushed by Samsung and Visa.
Other firms such as SK, LG Caltex, and Lotte World are considering taking part in the money project at a time when the e-commerce and Internet markets in Korea are rapidly expanding.
Samsung officials said the cyber money to be developed with Visa will be available both on and offline, a key difference with other existing e-money systems.
Not only the sellers of digital content such as MP3 music files but also gas stations, convenience stores, fast food restaurants and theme parks will adopt the new e-money, accelerating the circulation of Internet money, they said.
The key target users of the e-money will be the so-called Net-generation, Internet savvy teens and twentysomethings. Samsung expects the annual market volume will be around 10 trillion won once e-money stabilizes.
In theory, users can download cyber money from commercial banks through a charge system at home and then use the money at brick-and-mortar stores.
Analysts said e-money is suitable for transactions of less than 200,000 won, which can be translated into a 100 trillion won market in the future.
Noticing the potential of e-money and related businesses, Samsung plans to expand the system to other services including electronic ID cards and bus/subway passes.
Yet the e-money itself is spawning heated disputes over different standards among those who wish to jump into the market.
The Bank of Korea unveiled a general concept of its e-money, albeit sketchy, and the Ministry of Commerce, Industry and Energy (MOCIE) also set about developing its own version.
The Bank of Korea plans to set up a test-level cyber cash system this month before offering a pilot service in March, 2000.
MOCIE, which also decided to develop an e-money system by 2002, is seeking partners for the project.
Such fast-paced moves toward cyber cash are encouraging in a way, since other nations are also rushing to adopt and refine e-money in preparation for full-fledged e-commerce.
Yet critics claim that various Korean-style e-money systems, which are now being hurriedly pushed by different players, may backfire and lead to a waste of money, saying that MOCIE's project is overlapping the BOK version.
The dispute dates back to 1997 when the Bank of Korea announced it would push an e-money project. At that time, the move was widely hailed as pioneering and foresighted.
But as time passed, new solutions regarding electronic transactions were introduced en masse and the overall technologies made dramatic progress, rendering the BOK's e-money obsolete.
The underlying weakness of the BOK version is that it has a closed and exclusive structure, unable to handle transactions among individual users. That is a serious flaw compared with the open structure of other e-money systems that have recently emerged.
The BOK, however, maintains that it is not in a position to halt the project at this time. It argued that the closed e-money system is better secured against hacking or forgery, a factor that can compensate for a lack of international compatibility.
To overcome this limitation, the BOK plans to diversify its e-money system by adding new functions such as prepaid cards, bus/subway passes and telephone cards.

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