North Korean authorities have taken a number of measures to increase the use of debit cards and promote electronic payments and shopping since the implementation of the 20×10 regional development policy. But North Koreans still find the cards inconvenient because they can only be used at state-run stores and because cash deposits and withdrawals are time-consuming.
The Jonsong Card: Widespread but underutilized
Multiple sources in North Korea told Daily NK on July 19 that just about every North Korean adult now has at least one “Jonsong Card.” The Jonsong Card, first issued by the central bank of the Democratic People’s Republic of Korea in 2010, is a type of debit card that can be used to spend cash deposited in a linked account.
Although well over a decade has passed since the Jonsong Card was issued, few North Koreans actually use it. This is partly because public trust in banks remains low following a disruptive currency reform in 2009, and partly because only a limited number of merchants can actually accept the card.
Sources say that only certain segments of the population in major cities such as Pyongyang, Chongjin, and Sinuiju use the Jonsong Card, as well as other brands such as the Narae Card and the Koryo Card.
In recent months, however, North Korean authorities have been pressuring more people to use their debit cards. Regional banks have been sending representatives to factories and businesses in the area to help workers set up mandatory bank accounts and urge them to get debit cards linked to those accounts.
This has coincided with a sharp increase in the number of factories and companies depositing wages into workers’ bank accounts rather than paying them in cash or in kind.
Motivations behind the push for electronic payments
The North Korean authorities appear to be pushing the public to use debit cards and other forms of electronic payment to bring their idle cash into the official financial network.
Son Gwang-su, an analyst at KB Financial Group Research Institute, told Daily NK in a phone interview that “the recent recommendation by North Korean authorities to use debit cards and electronic payments seems to be related to the 20×10 regional development policy.
“By arranging for idle funds [both local and foreign currency] accumulated by individuals and the market to be deposited in bank accounts and used through electronic payments, the authorities hope to monitor and control the circulation of currency,” Son said.
Regional banks are opening accounts and issuing cards to workers in the factories and businesses they visit to raise the funds needed to build regional factories. But since even these banks are ultimately under the control of the central bank, more public use of the official financial network has the effect of putting idle funds in the hands of the authorities.
In addition, since the adoption of the 20×10 regional development policy, the North Korean authorities have severely restricted the activities of money changers and remittance brokers, both to stimulate business for regional banks and to extract foreign currency from individuals.
As a result, the North Korean won-dollar exchange rate in the market has skyrocketed to KPW 14,000. The North Korean authorities’ crackdown on private currency exchange and remittances appears to be creating an environment in which more and more North Koreans are forced to use banks, debit cards, and the electronic payment system.
Advantages and limitations of electronic payments
For employees, there are some convenience aspects to having their wages directly deposited. Users receive a deposit notification on their mobile phone and can check their account balance, provided they have an electronic payment app such as Ullim installed on their phone. The same app allows them to transfer money to people in other parts of the country.
As the authorities crack down on private financial services while expanding the scope of the electronic payments system, there appears to have been a modest increase in the number of people using the system in recent months.
Nevertheless, debit cards and the electronic payment system remain of limited use in the daily lives of North Koreans. Daily NK understands that the only places where debit cards can be used are state-run shops and large commercial outlets such as department stores. Thus, except for residents of large cities, even people with the electronic payment app and a debit card linked to a bank account rarely use it.
Moreover, the monthly wages of ordinary workers are not even enough to buy a kilogram of rice, which costs about KPW 6,000 at a marketplace, and debit cards cannot be used at marketplaces anyway. In short, depositing workers’ wages into bank accounts is unlikely to encourage the use of debit cards or revitalize the electronic payment system.
Another problem is that while private transfers are usually made in foreign currency, transfers through the official financial network can only be made in local currency. This means that users have to convert their foreign currency into North Korean won, which involves fees and a potential loss on the conversion.
As a result, North Koreans often say that no matter what controls the authorities try to impose, money changers and currency brokers will never go away. The fact is that private financial services are simply cheaper and more convenient than the official financial network.
Future prospects for electronic payments in North Korea
According to a source in North Korea, about 30% of Pyongyang residents in core districts such as Chung (Central) and Moranbong use debit cards or the electronic payment system, apparently because of the large number of department stores and state-run shops in those districts. But in the suburbs of the capital, such users account for less than 5% of the population. And this is in Pyongyang, the home of the country’s elite.
Are the North Korean authorities aware of these problems? The government recently ordered a technical review of the country’s electronic payment system by October to ensure the system is running smoothly. While it is unclear whether a technical review will increase the use of this system, it does indicate that the authorities are determined to make this system work.
“North Korea’s use of electronic payments seems to have increased in the decade or so since the system was first introduced, both because the North Korean authorities have encouraged the use of electronic payments and because the relevant infrastructure has expanded,” said Son, the KB analyst. “But for the use of debit cards or electronic payments to really increase, the payment network, including card readers and ATMs, needs to be built, and North Koreans need to be convinced of the safety of electronic payments.”
Daily NK works with a network of sources living in North Korea, China, and elsewhere. Their identities remain anonymous for security reasons.
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