These days, many people in South Korea rarely use cash, even when they spend a small amount of money like public transportation fares, thanks to various electronic payment solutions including Internet banking, credit cards and simple payment services. Some offline stores even refuse to take cash. As a result, many do not carry around a wallet, much less cash. They don’t really have a problem in their daily lives as long as they carry their credit cards or mobile phones. How about people in North Korea? 

Today, we’ll learn about North Korea’s electronic payment systems from Seo So-young, research fellow at the Korea Information Society Development Institute. 

According to a report released by the Bank of Korea, North Korean residents were using different types of payment solutions, such as domestic currency cash, foreign currency cash, grain, phone money, foreign currency cards and domestic currency cards in the period between 2015 and 2019. The report also shows that the use of electronic payment options, along with foreign currency cash, increased after 2010. North Korea’s massive currency reform in 2009 is believed to be one of the major reasons behind the change. 

The private market or jangmadang flourished in North Korea in the 1990s. In the 2000s, a rise in public trade as well as in smuggling prompted foreign currencies to flow into the country and subsequently increased the amount of money in circulation. But North Koreans, in most cases, refused to deposit their money in local banks because they did not trust the banks. It is said that North Korean authorities enforced the currency reform with the purpose of circulating the idle money held by citizens. 

North Korean people found that their money became a mere scrap of paper after the 2009 confiscatory currency reform. They lost trust in the local currency and used foreign currencies like the dollar and the yuan more actively. They were growing increasingly distrustful of local banks as well. 

Analysts note the fact that North Korea restarted the mobile communications service in 2008, right before the currency revaluation. At the time, the nation’s third-generation or 3G mobile network was established with the investment of Egyptian telecom giant Orascom. 

When North Korea launched a second-generation or 2G system in November 2002, it only allowed the military and high officials of the party to access the network for work-related purposes and provided them with cell phones. But after 2008, users themselves purchased cell phones and universal subscriber identity module or USIM chips. 

Some analysts say that North Korea resumed the mobile communications service in 2008 to absorb idle foreign currencies that were not in circulation. 

North Korea is known to have introduced an integrated circuit or IC cash card called Sili around 2005. 

An electronic payment card called Narae began to be used in 2010 to pay for goods and services in foreign currencies. It is a prepaid card, in which users put a certain amount of money in advance. 

In North Korea, electronic payment cards can be used without being connected with bank accounts. Users have to visit a bank to make a card first, but they can add more cash to their card, as much as they want, at banks, hotels or department stores. They don’t need to bother to carry thick bundles of cash in their pockets, and they don’t need to get the change, either. The cards can be used for money transfer as well. 

There are no exact statistics, but it seems there were five types of payment cards in North Korea in 2010 and the figure rose to 20 in 2018. But a majority of North Korean citizens do not really prefer electronic payment. 

With smartphones spreading around the globe, people say that the world is experiencing another “industrial revolution.” North Korea is no exception. 

In North Korea, much like in the rest of the world, mobile phones are used for various purposes. If North Koreans are short of cash, they can trade their cell phone airtime. 

In the North, phone subscribers can use 200 free minutes of phone calls per month for three months as long as they pay a basic fee each quarter. They can sell this calling time to persons who need it. They can also use it, instead of cash, when buying goods. 

North Korea reformed mobile phone plans in the mid-2010s. The basic plan with 200 free minutes of phone calls per month for three months remains the same. But once subscribers pay a basic fee on a quarterly basis, they are given 150 won each month, that is, 450 won for three months, in the name of “phone money.” If they go over the free minutes allowed under the plan, they can use the phone money to pay for extra minutes. Once the phone money is provided, users cannot exchange cell phone airtime but they are allowed to trade the phone money instead. 

The unique system of “phone money” could be understood as a sort of mobile money. 

With the number of mobile phone users increasing in North Korea, new online shopping platforms called Manmulsang and Okryu have appeared. The former is aimed mostly at PC users and the latter, mobile phone users. 

It is said that North Korea’s electronic commerce stores, in the early stage, allowed customers to order goods online but the customers paid in the form of giving cash to deliverymen. Later, the country developed a mobile payment app called “Woolim” that enables its users to make payments with money loaded onto cards. 

In 2020, North Korea’s propaganda website Meari said that the country developed a mobile payment system and was introducing it in daily lives. It added that the service is a new type of transaction method that allows people to pay service fees and various other fees using their smartphones. 

North Korea enacted the Electronic Payment Act in 2021 with the purpose of reducing the amount of cash in circulation, increasing the use of cashless payment options and facilitating monetary circulation. The country revised the act in July, although specifics were not disclosed. 

In line with the development of information and communications technology, North Korea’s electronic payment systems are likely to expand gradually. We’ll have to wait and see how this sector in North Korea may evolve down the road.