Will it be possible to see a society in the Republic of Korea where people do not receive change back after they spend cash? The Bank of Korea (BOK) said they will test-run the Change Account Savings Service (CASS) starting this year. The change from buying and receiving goods at convenience stores and supermarkets goes directly into the bank accounts of consumers. The BOK said it will recruit pilot operators to implement the system for the first half of this year, but there is a controversy regarding CASS. Some people view CASS to be an effective convenience for consumers, whereas others predict CASS will be useless. Will the introduction of this system turn out to be effective in Korean society, or will it be a pleasantly wrapped nuisance?
CASS is a service that deposits the change generated after a cash transaction into the bank account of a purchaser linked to a “cash IC card” and a “mobile cash card.” The BOK recruited distribution businesses wishing to participate in the project in order to implement the CASS. The BOK plans to introduce a “mobile direct payment service” jointly implemented by the banking sector through the Financial Information Service Promotion Council (FISPC) by the end of this year and provide additional CASS from the beginning of this year. The “mobile direct payment service” is a mobile version of a “cash IC card” based on a bank account. If a franchise store with the service generates a smartphone app’s QR code and enters a password, purchasers can pay with a cash card.
The Positive and Negative Expectations for the Service
There is an ongoing controversy in Korean society regarding the implementation of CASS. The service has both positive and negative sides. The service, if implemented, is expected to ease the inconvenience of carrying coins. Coins are not only heavy but also take up a lot of space in wallets. It is definitely a positive change for people who carry a lot of coins. In addition, it will become much easier for store-owners to give change whenever they receive cash, because they will not need to calculate and count the coins to hand over to customers.
It is also expected to reduce the costs of issuing coins, curtailing the social costs of distribution and management. According the BOK’s data, it takes 50 billion Korean Won every year in order to issue coins. If the BOK does not need to issue coins due to the CASS, the BOK can use this money for other aspects of the financial system, which can encourage the development of Korean society. Furthermore, it takes a great amount of effort to change outdated coins to new coins. If the CASS can ease the burden of distributing and circulating coins in the Korean economy, the economy will have a chance to further develop.
However, there are also many people who view the CASS in a negative perspective. Their main claim is that the service will not be effective in Korean society. In fact, people in current Korean society widely use credit cards rather than cash in order to reduce the amount of cash that they carry in their wallets. CASS is effective when people widely use cash.
People living in Korean society do not use cash as much as they did in the past, because there are so many new and convenient services that people can use. As technology develops drastically, companies like Samsung and Kakao make apps that can register people’s credit cards. Instead of carrying wallets, people register their credit card on smartphone applications and use it whenever they need money. Furthermore, there are many stores that have applied account transfer so that people do not need to pay cash and receive change; they simply transfer money from account to account through phone-banking. These useful services are widely used nowadays, and this is the main reason why people argue that CASS will not be effective in Korean society.
Objective Perspective on the Effectiveness
Then, objectively speaking, will CASS be effective in Korean society? Professor Kim Jinill (Department of Economics) claimed that Korea can expect a prominent effect from the CASS. It is true that credit cards are used widely in Korean society. However, more than 20 percent of people still use cash rather than credit cards. Due to the fact that the BOK spends approximately 50 billion Korean Won to produce new coins every year, Professor Kim anticipates that the BOK can save at least 20 percent of the budget, which can be used towards other aspects of the Korean economy.
On the other hand, Professor Kim mentioned that Korea cannot expect the effectiveness of the service as much as Japan. The percentage of people using cash in these two societies was almost similar until 2002, but Koreans started to use more credit cards than cash after many services connected to credit cards were provided. Because most Japanese still use cash, a service similar with CASS in Japan could succeed. Professor Kim added, “It is important for the BOK to provide several advantages for consumers to spread the CASS widely enough in Korean society.” People will not be interested in the service if there is no benefit for them to use it. Therefore, additional services like 10 percent cashback whenever consumers use the CASS, have the potential to effectively attract consumers.
If the CASS spreads widely in Korean society, people can expect more convenient services. Extensive usage of the CASS would mean that more parts of the Korean economy would turn to virtual money, or cryptocurrency. The flow of money is going to become faster compared to the past, because most businesses will be managed digitally. The economic burden of issuing and circulating currencies will be lessened and the economic surplus from reducing this burden will provide a great chance to bring positive developments in the Korean economy and society.