Page 360 - Introduction to Electronic Commerce and Social Commerce

Case 11.1. EC Application: Innovative Credit Card Micropayments for the Korean Metropolitan Unified Fare System 347

Figure 11.4 Process of mobile Mobile Payment
payment service. (Drawn by Service Provider
D. King & J. K. Lee)
3. Create a
password

Telco 2. Confirm
Server Phone Number
4. Send
password to
mobile phone Online
Site
5. Input
password and
purchase
Wireless
Telco 1. Request
Purchase;
Input mobile
number

Customer

booths were installed at MRT stations. However, with the The Results
credit card, recharge booths can be eliminated altogether and
users do not have to spend time recharging their cards. Due to the national standardization and integration effort,
Therefore, both the users and the city transportation author- nationwide transportation cards are now unified using smart
ity benefit. cards. Credit card companies do not really make enough
Another benefit of the smart transportation card is that it money through transportation payment services, but this ser-
can restructure the city’s transportation system by aligning vice is essential for them to gain new customers and retain
and coordinating the routes of subways and buses. In the existing ones.
past, bus routes were designed in consideration of the depar- The city also can collect data about commuters so that
ture and destination points of citizens’ trips. This approach additional buses can be dispatched depending upon the pas-
intended to make it convenient for citizens to take only one senger load by route and time. Note that, at midnight, regular
bus to reach their destination. However, too many buses cre- bus services stops. For midnight bus service, the control cen-
ated bottlenecks in busy streets, causing traffic jams. To ter analyzes the frequency of mobile phone usage in certain
avoid such congestion, the MRT and main bus companies areas to estimate the number of potential commuters and
planned to design the transportation system so that bus dynamically determine the routes of midnight buses.
branch routes are connected to the subway and to the main Another lesson that can be learned from Korea’s experi-
bus routes. However, if citizens are required to pay an addi- ence is the C2C payment system use of credit cards. In C2C
tional fee for branch routes, they may resist the new struc- auction markets, escrow services that are based on credit
ture. Therefore, the transportation fare card should be cards allow individual buyers to pay eBay Korea directly.
interconnected. The sellers can receive payment through eBay Korea if deliv-
To solve this problem, the transportation card, credit or ery is confirmed by the buyer. Therefore, there is no need for
stored-value, is designed to memorize the departure time an e-mail payment system such as PayPal that charges high
from the MRT station so that the connecting buses do not service fees. The function of a debit card, combined with a
charge passengers again if the elapsed time is less than credit card, has also virtually replaced the function of elec-
30 min. Taking a branch bus is regarded as a transfer for tronic checks, so e-checks are no longer needed. In this man-
single trip. This means that the owners of transport systems ner, payments by credit cards in Korea are electronically
need to agree on about how to allocate the collected fees. integrated for e-commerce, physical stores, and micropay-
Therefore, the city of Seoul adopted the Metropolitan Unified ments for transportation.
Fare System in 2009. Sources: Case written by Jae K. Lee, Seoul, Korea.