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Government support is necessary for the healthy development of the FinTech sector, which can potentially revolutionize financial services products, services, and delivery mechanisms worldwide and deliver social and economic outcomes more effectively and efficiently.
Looking at developments worldwide, it is not clear that there is consensus on how or where government support should play into the FinTech sector's evolution and, in turn, its role more broadly within the financial services industry and national economy. By supporting and promoting FinTech, governments are broadly looking to increase financial inclusion and access. Also, FinTech provides opportunities to expand the reach of financial services with potentially substantially positive impacts for the public. For the practical expansion or new opportunities of financial services such as FinTech, the government's leadership and engagement and collaboration of citizens and financial institutions are essential.
SMG(Seoul Metropolitan Government) is started “ZeroPay,” a QR code-based mobile secure payment service to reduce small business owners' commission burden. “ZeroPay” is a mobile payment system in which a user takes a QR code in a store using a banking app for a smartphone or a simple payment app, and then receives a cash payment by inputting the purchase amount. When the user makes a credit card payment, the card company will pay the fee, but ZeroPay is a cash direct transaction fee.
In traditional card payments, merchants had to pay a fee when they approved for payment. In the process, credit card companies, VAN(Value added Network) companies, and electronic payment agencies took fees, and small businesses suffered. ZeroPay, on the other hand, is a form of bank transfer where the bank transfers cash from the consumer's account to the seller's account. Suppose the user run a smartphone-only payment application and take a QR code in the store with a camera. The amount is displayed, and payment is made by authenticating with a password or fingerprint. On the contrary, users can pay by running the app, launching a unique QR code, and recognizing it as a store-only reader.
In the face of the private payment method's difficulty, the Small and Medium Venture Business Department and some local governments are jointly promoting the introduction of the tentative name ZeroPay for small businesses. Since ZeroPay is built on an open platform, all banks and simple payment apps can use standard QR codes.
Compared with other developed countries, there is a unique characteristic of the retail payment market in Korea. The fact is that credit cards, which are the most expensive payment methods, are fixed as the most common payment method, among the law forcing stores to pay by credit card. ZeroPay is a policy project created by the government's proposal.
In the ZeroPay service, private banks and non-financial simple payment companies that agree to the conditions presented by the government have signed an agreement with the government to provide payment services using their platform. The success or failure of the ZeroPay project depends on the active participation and will of private companies because the government does not directly provide payment services. Still, the government's policy projects are carried out by private companies.
The agreement between the government and participating companies actively cooperates in minimizing payment fees for small businesses. In particular, it does not charge settlement fees or wire transfer fees for policy-selected merchants selected by local governments. As a general rule, a fee is charged to merchants because a certain amount of money incurred in payment through a simple payment system.
Before starting the ZeroPay service, there were many negative opinions and evaluations in the market. For this reason, SMG needed a lot of effort to settle the service above all else. In particular, financial institutions' active participation such as citizens, small business owners, banks, and credit card companies, and the government's role was most important.
This paper discusses what is required for FinTech services to settle in the market and discuss government-led FinTech services such as ZeroPay service. We also discuss how ZeroPay can overcome various issues and conflicts, secure market competitiveness, provide various benefits to stakeholders, and settle services while resolving conflicts between existing financial companies. This paper also discusses the efforts of stakeholders in SMG for service engagement and collaboration.
In the paper, we discuss the “ZeroPay” service, why SMG started this service, its strategic approach, and its problems, solutions, government roles, and directions to follow.