Abstract
The Bank of Korea (BoK) is planning to create a coinless society by the year 2020. This initiative was initially motivated by the need to reduce the inconvenience associated with the use of coins, to save the cost of minting coins and to help the smooth change-over in the event of a possible redenomination of the Korean Won (KRW). But as Korea is well equipped with cashless payments such as credit cards and FinTech payments, this initiative was further expanded to test the possibility of a cashless society before ultimately shifting to it. Eliminating coins from circulation means that the BoK is developing an alternative payment instrument to coins for the giving and receiving of small change in commercial transactions. This study evaluates the merits of different possible electronic payment methods and services such as credits cards, public transportation cards, electronic cash receipts and digital wallets, and shows that Korea has a high potential to realise not only a coinless society but also a cashless society. If realised, a coinless society will mark a new era that will herald the end of the age of commodity money and eventually paper money.
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Notes
- 1.
The exchange rate of the Korean won (KRW) vis-Ã -vis US dollar is fluctuating between 1000 and 1200 KRW. But for the sake of simplicity, one can suppose that 1000 KRWÂ =Â 1 US dollar.
- 2.
Let alone its rounding effect, the denomination is expected to increase the expenditures on real goods by the people who hoarded the cashes, especially large denomination cashes, through illegal transactions or tax evasions because the latter will avoid reporting their cash hoardings to the banks which could be subject to the examination and investigation of tax authority.
- 3.
It is worth noting that the goal of coinless society is not to ban the use of coins but rather to allow consumers to substitute coins with more convenient electronic or digital instruments. Just as the development of credit or debit cards has substituted for cheques, new digital instruments can compete with coins for wider use of consumers .
- 4.
For instance, consumers can charge the T-money at subway stations and convenience stores directly or through bank ATM , Internet and mobile applications.
References
Bank of Korea (2016a) Payment and settlements system report 2015, August
Bank of Korea (2016b) Survey on the use of payment instruments 2016, December
Bank of Korea (2016c) Plan for a coinless society (In Korean). Department of Payment and Settlements
Beer C, Birchler UW, Gnan E (2015) Cash without future? Future without cash? A wider view. SUERF Policy Note Issue No 3
Kim C (2015) Mobile payment and settlements in Korea and abroad (In Korean). In: Paper presented at the digital banking seminar organized by the Bank of Korea
Rogoff K (2014) Costs and benefits to phasing out paper currency. Paper presented at NBER macroeconomics annual conference, April 2014
Acknowledgements
I would like to thank Lee, Jongryeol and Kim, Jung Hyeok, two members of staff at the Department of Payment and Settlements, Bank of Korea, as well as all the participants of the seminar, Cash in East Asia, for their helpful discussion and comments. I would also like to thank Chris Engert for his excellent language editing.
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Moon, W. (2017). A Coinless Society as a Bridge to a Cashless Society: A Korean Experiment. In: Rövekamp, F., Bälz, M., Hilpert, H. (eds) Cash in East Asia. Financial and Monetary Policy Studies, vol 44. Springer, Cham. https://doi.org/10.1007/978-3-319-59846-8_7
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DOI: https://doi.org/10.1007/978-3-319-59846-8_7
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