South Korea’s central bank has launched a pilot project that aims to digitize payment vouchers as part of its wider central bank digital currency (CBDC) trial.
The Bank of Korea (BOK) announced the new pilot last week. The initiative seeks to expand the use cases of the upcoming digital won. BOK partnered with the Financial Services Commission (FSC) and the Ministry of Science and ICT on the initiative. It also involves some of the country’s largest banks, including Shinhan Bank, Kookmin Bank, Woori Bank and Nonghyup Bank.
Vouchers are popular in many Asian nations, and South Korea is no exception. However, a sizable share of the market still relies on physical vouchers on paper and plastic cards. In the current setup, merchants receive the vouchers, process them physically and then reconcile their accounts.
The BOK believes that digitizing this sector could unlock massive value, reduce inefficiencies and open up a new market for vouchers. Additionally, it will stamp out fraud, such as counterfeiting and fake vouchers, duplication and reuse, employee fraud and alterations.
The pilot will introduce QR codes and a mobile app for easier processing at the merchant store. The seven participating banks will issue deposit tokens based on the digital won, which merchants can use for instant settlement.
Commenting on the pilot, BOK Governor Lee Chang-yong noted that while the focus has been on high-level use cases, it’s vital to use blockchain for smaller use cases that may not grab headlines but still change people’s lives.
Science and ICT Minister described the pilot as a “valuable first step toward accelerating the transition to a digital economy through new digital financial services utilizing blockchain technology, CBDC and deposit tokens.”
“We expect that new digital financial services based on blockchain technology will provide practical convenience and efficiency to the people’s economic activities, and we will not spare our active support and efforts going forward.”
It’s not South Korea’s first digital voucher pilot. Four months ago, the BOK revealed that it had invested KRW 20 billion ($14.5 million) to spur blockchain adoption across 14 projects; one of these was on digital vouchers, which the bank said would help curb incidences of voucher fraud.
Elsewhere in Asia, other central banks are digitizing payment vouchers to keep up with the rise of digital finance. In July, Taiwan announced that it would integrate its digital voucher system with its CBDC prototype. The Ministry of Digital Affairs will oversee the voucher distribution, while the central bank will oversee the payments and settlements.
In other countries, the application has been more complex. In Singapore, for instance, the Monetary Authority of Singapore (MAS) has pursued “purpose-bound money,” which can be viewed as an extension of digital vouchers. This money is programmed for a particular use and can’t be diverted to any other payment, similar to a voucher in the traditional setup.
However, programmable CBDCs are a polarizing topic whose criticism has been so severe that some, like the European Commercial Bank, have been forced to outrightly renounce them.
Busan launches blockchain platform for lost items
In the southeastern part of Korea, the city of Busan has launched a digital platform powered by artificial intelligence (AI) and blockchain technologies to recover lost items easily.
Dubbed Finding All, the new platform seeks to transform how city dwellers report, track and recover their lost items. According to the Korean National Police Agency (KNPA), over a million items are reported lost annually in Korea, with less than half recovered by their owners.
Koreans who lose their items—which can range from keys and phones to wallets and clothing—need to physically search for them across cities, which is inefficient, costly and time-consuming. They are also required to report to the local authorities, a process that can be cumbersome, leading many to abandon the lost items altogether.
With Finding All, reporting lost items is as easy as clicking a button on the mobile app. Users can then use integrated AI to search the database of lost items for the best matches. The platform integrates with the existing—albeit centralized—Lost112 system operated by the national police. To cater to tourists, it offers Korean, Chinese, English, Japanese, Spanish and Vietnamese options. Users can also offer rewards to anyone who finds their items via the app, increasing the likelihood of recovery.
Blockchain is used in the background to power the record-keeping system, maintain the integrity of the user data and prevent fraud. All user actions are recorded on the distributed ledger, which is transparent and immutable. The city didn’t reveal which blockchain network it would build the new application on.