Zero Pay is unfair game

The Ministry of SMEs and Startups and the Seoul city government said they would seek to set up a private company that would operate the "Zero Pay," a payment system for smartphones. It has been confirmed that the ministry sent official letters to major state-funded and commercial banks, including IBK, Shinhan Bank and KEB Hana Bank, requesting that each of them contribute a combined total of over 30 billion won (25.4 million U.S. dollars) to establish the company. The ministry also promised the banks to turn the financial contributions into donations once the company is set up.

As Zero Pay charges fees to neither the sellers nor consumers, the payment service cannot generate any profits in the first place. If the business becomes profitable, it would go against the intention of the system. It is preposterous to set up a private company that does not seek profits. As no private companies in their right minds would ever invest in such a business model, the ministry put pressure on the state-funded and commercial banks.

It is ridiculous to ask the banks, most of which already have their own credit card subsidiaries, to spend their own money to support a competitor's payment system. Most commercial banks regard the contribution request as a "robbery" in the name of donations. Nevertheless, they find it difficult to resist the government's policy. Even the Financial Services Commission, also a government agency, says that how the ministry or Seoul could ever come up with such an idea.

Between December 2018, when Zero Pay was launched, and May this year, the payment system was used 365,000 times, amounting to 5.7 billion won (4.8 million dollars), far less than the 9.8 billion won (8.3 million dollars) in budget spent to promote the system and attract member stores. During the same period, credit cards were used for 4.9 billion transactions worth 266 trillion won (230 billion dollars), and check cards for 3.2 billion transactions totaling 74 trillion won (62.6 billion dollars).

From the beginning, the government is playing an unfair game with Zero Pay, as it plunged into private businesses' payment market with state money and tax benefits. As the results are minuscule, the government itself is committing unfair business acts of all sorts that it has been criticizing.

The government might think that it would adhere to such a makeshift policy with patience until the system pays off. Everyone knows the results of the minimum wage hike. Unable to deny the results, the government is now talking about a freeze or a minimal increase. But the government fails to learn a lesson from the terrible failure of Zero Pay. Albert Einstein call the act of repeating the same behavior in expectation of different results "insanity." With Zero Pay, the government has sought sufficient political publicity as a caretaker for self-employed people. Enough is enough. The government should give up the payment service for the sake of the interest of both the state and taxpayers.


Kwang-Hyun Kim kkh@donga.com