South Korea’s central bank has launched a pilot project that aims to digitize payment vouchers as part of its broader central bank digital currency (CBDC) trial.
The Bank of Korea (BOK) announced the new pilot last week. The initiative aims to expand the use cases of the upcoming digital won. BOK collaborated with the Financial Services Commission (FSC) and the Ministry of Science and ICT for this 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 countries, and South Korea is no exception. However, a significant portion of the market still relies on physical vouchers on paper and plastic cards. Under the current setup, merchants receive the vouchers, physically process them, and then reconcile their accounts.
The BOK believes that the digitalization of this sector can unlock enormous value, reduce inefficiencies and open a new market for vouchers. Furthermore, it will eradicate fraud such as counterfeiting and counterfeit vouchers, duplication and reuse, fraud and employee changes.
The pilot introduces QR codes and a mobile app for easier in-store processing. The seven participating banks will issue deposit tokens based on the digital won, which traders can use for immediate settlement.
Commenting on the pilot, BOK Governor Lee Chang-yong noted that while the focus was on high-level use cases, it is critical to use blockchain for smaller use cases that may not make headlines but still impact lives change people.
The Minister of Science and ICT described the pilot as a “valuable first step towards accelerating the transition to a digital economy through new digital financial services using blockchain technology, CBDC and deposit tokens.”
“We expect that new digital financial services based on blockchain technology will bring practical convenience and efficiency to the people’s economic activities, and we will not spare our active support and efforts in the future.”
It is not the first pilot with digital vouchers in South Korea. Four months ago, the BOK revealed that it had invested KRW20 billion ($14.5 million) to boost blockchain adoption across 14 projects; one of these involved digital vouchers, which the bank said would help reduce the number of voucher fraud cases.
Elsewhere in Asia, other central banks are digitizing payment vouchers to keep pace with the rise of digital finance. In July, Taiwan announced it would integrate its digital voucher system with its CBDC prototype. The Ministry of Digital Affairs will oversee voucher distribution, while the central bank will oversee payments and settlements.
In other countries the application has been more complex. In Singapore, for example, the Monetary Authority of Singapore (MAS) has been pursuing “purpose-based money,” which can be seen as an extension of digital vouchers. This money is programmed for a specific use and cannot be diverted to another payment, similar to a voucher in the traditional setup.
However, programmable CBDCs are a polarizing topic with criticism so fierce that some, such as the European Commercial Bank, have been forced to abandon it outright.
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 easily find lost items.
The new platform, called Finding All, aims to transform the way city residents report, track and recover their lost items. According to the Korean National Police (KNPA), more than a million items are reported lost in Korea every year, of which less than half are recovered by their owners.
Koreans who lose their belongings – which can range from keys and phones to wallets and clothes – have to physically search for them in cities, which is inefficient, costly and time-consuming. They are also required to report the loss to local authorities, a process that can be cumbersome, causing many to abandon lost items altogether.
With Finding All, reporting lost items is as easy as clicking a button in the mobile app. Users can then use integrated AI to search the lost property database for the best matches. The platform integrates with the existing, albeit centralized, Lost112 system of the national police. To accommodate tourists, it offers Korean, Chinese, English, Japanese, Spanish and Vietnamese options. Users can also offer rewards to anyone who finds their items through the app, increasing the chance of recovery.
Blockchain is used in the background to power the registration system, maintain the integrity of user data, and prevent fraud. All user actions are recorded in the distributed ledger, which is transparent and immutable. The city has not disclosed on which blockchain network the new application will be built.