A Coinless Society as a Bridge to a Cashless Society: A Korean Experiment

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.