Electronic receipt

[Electronic Receipt]

1. Overview

An electronic receipt is a digital certificate issued by a business to a consumer, transmitting transaction information to the consumer's digital device (smartphone, PC, etc.). South Korea is the first in the world to commercialize mobile electronic receipts, and The Real Co., Ltd. has been developing and providing electronic receipt services domestically since 2014.

2. Comparison 2.1. Paper Receipts vs. Electronic Receipts - The only difference between paper receipts and electronic receipts lies in their issuance methods; they contain the same layout and information. The primary reason to replace paper receipts with electronic ones is environmental concerns. Paper receipts generate a significant amount of carbon and waste during their production and disposal processes, and considering printers exacerbates carbon emissions. Additionally, there are concerns about environmental hormones (Bisphenol A) due to the special chemical treatments involved in paper receipt production.

- Replacing paper receipts with electronic ones also offers cost benefits. With electronic receipts, costs associated with purchasing receipt paper and regularly replacing printers become unnecessary, leading to at least a 50-90% cost reduction. However, there are differences in receipt issuance legislation among countries, necessitating institutional support for the introduction of electronic receipts. 2.2. Card Receipts (Approval Statements) vs. Electronic Receipts

Paper receipts typically include detailed purchase information such as product names, items, quantities, sizes, and payment method details, enabling exchanges, refunds, and transaction evidence. In South Korea, when making a payment with a credit card, the payment date and amount are sometimes transmitted via SMS or app. However, these are simple card statements and are not recognized as evidence for exchanges or refunds. For electronic receipts to fully serve the same function as paper receipts, they must include detailed purchase information, not just basic payment details. Only then can electronic receipts completely replace paper receipts and eliminate the need for printing paper receipts. 3. The Necessity and Effects of Adopting Electronic Receipts 3.1. Benefits for Retailers - Cost savings on receipt paper purchase

Typically, retailers either directly purchase receipt paper or include receipt purchase costs in the operation expenses of POS machines or card terminals. By replacing them with electronic receipts, retailers can save their money.

- Cost savings on paper receipt disposal

Paper receipts, being chemically treated, are non-recyclable (Many countries lack recycling policies) and must be either landfilled or incinerated. By replacing them with electronic receipts, costs incurred at personal and national levels during this process can be reduced.

- Reduction in disputes related to refunds and exchanges

Often, proof of transaction in the form of a receipt is required for refunds or exchanges of purchased products or services. However, many consumers fail to prove their purchase evidence due to loss or non-receipt, leading to disputes between consumers and retailers. Electronic receipts facilitate easy long-term storage and can be readily accessed via mobile devices, preemptively averting such disputes.

- Environmental hormone issue

Businesses like coffee shops and supermarkets, with high transaction volumes, frequently handle receipt paper, elevating the risk of exposure to environmental hormones. Hence, it's common in Korea for staff handling transactions to wear disposable gloves. Electronic receipts can mitigate the risk of environmental hormone exposure.

3.2. Benefits for Customers - Easy storage and utilization of receipts

Compared to traditional paper receipts, the inconvenience of storage and management is reduced, and space can be saved. Electronic receipts offer the same layout as paper receipts and possess equivalent efficacy during product or service exchanges and refunds.

- Simplification of payment history tracking

Electronic receipts contain detailed payment information (product names, quantities, types, etc.) in a format identical to paper receipts. They enable easy identification of additional payment facts resulting from payment errors (e.g., barcode duplication).

- Reduced risk of exposure to harmful environmental substance Bisphenol A

Decreased contact with paper receipts can prevent adverse effects of Bisphenol A.

3.3. Benefits for Credit Card Companies Many credit card companies in Korea provide a service that notifies customers of payment time and amount via SMS.

- Cost Reduction of Sending Payment Notification Messages

By encouraging the issuance of electronic receipts through the card company's app, the card company can reduce the cost of sending payment (approval) notification SMS for each card transaction.

- Reduction in Customer Complaints

The payment notifications currently provided by Korean credit card companies only inform the customer of the payment method, time, amount, and merchant. As a result, there have been inquiries and complaints from customers who need more detailed information. By implementing electronic receipts, customers can receive the same information as on paper receipts, thereby reducing related inquiries.

4. Obstacles to Implementing Electronic Receipts 4.1. Obstacles for Stores/Individual Business Owners - The main reason is that consumers’ lack awareness about electronic receipts, so they do not request electronic receipts instead of paper receipts.

- Paper receipts are still provided free of charge by some VAN companies, and the cost of paper is often bundled with the installment payments for the payment terminals. As a result, stores do not have a clear understanding of the costs involved.

4.2. Obstacles for Consumers - There is still a lack of awareness about electronic receipts. Even if people know about electronic receipts, many are unaware of which stores and brands offer this service. Additionally, the inconvenience of having to install separate apps for each brand to receive electronic receipts is significant. As a result, non-major franchise brands either do not offer electronic receipt services, or if they do, the number of users is very low. 4.3. Obstacles for Headquarter - In the case of large franchise headquarters, they prefer to issue receipts through their own channels to strengthen brand loyalty. This preference results in additional development costs and subsequent operating management costs. While these costs wouldn't be necessary if they continued using paper receipts, implementing electronic receipts would be profitable when considering the cost of receipt paper purchases by franchisees and the benefits from an ESG (Environmental, Social, and Governance) perspective.

- Issuing electronic receipts through brand apps requires users to enter their phone number or present a user barcode from the app, creating a hurdle that necessitates training for franchise owners until the system stabilizes after its introduction. 4.4. Obstacles for Stakeholders in Paper Receipts There may be negative reactions from stakeholders involved in the revenue structure of the supply chain, including receipt paper and printer manufacturers.

5. Methods of Issuing Electronic Receipts in South Korea Many countries globally send electronic receipts via email, but in South Korea, apps are more commonly used than email.

5.1. Personal Pre-Identification Methods (App Barcode, Phone Number Key-in) - This method requires personal information verification at the point of sale to issue an electronic receipt. This includes recognizing a membership barcode or entering a phone number. When issuing electronic receipts through their own app, users must be logged in after registering as a member, and personal information registered during membership is used to identify the recipient.

- This method is mainly applied by brands of a certain size that have their own app or membership system. From the consumer's perspective, there is the inconvenience of installing an app or entering a phone number for each brand. 5.2. Companies Using Identification Methods - Starbucks (Franchise Cafe)

Customers can view electronic receipts in the app when they order via Siren Order (a service in Korea where orders are placed and paid for through the app for in-store pickup) or pay with a registered Starbucks card in the app. Starbucks actively utilizes electronic receipts, making paper receipts available only upon request at the counter.

- CU (Convenience Store)

After visiting the store and making a payment, customers can receive an electronic receipt by scanning a QR code in the CU app.

- Paul Bassett (Franchise Cafe)

After payment, customers can receive an electronic receipt via the Paul Bassett account on KakaoTalk (a Korean messaging service) by entering their phone number.

- Olive Young (Drugstore)

During the payment process, customers verify their membership by entering their phone number. If the membership is confirmed, the receipt is automatically sent to the app.

5.3. Non-Identification Methods - This method issues electronic receipts without verifying the recipient's personal information. In other words, customers do not need to enter their phone number or show a barcode in the app to receive an electronic receipt.

- In identification methods, the entity issuing the receipt and the entity providing the service to view the receipt are the same. Companies issue receipts, and they can be viewed in the company’s app. In non-identification methods, electronic receipts can be viewed through the app of the card company or financial institution that holds the user's payment data, not the issuer. This allows users to check receipts from various stores in one app.

- In Korea, Kookmin Bank's Star Banking app is the first to introduce this service. 5.4. Channels for Issuing Electronic Receipts - Franchise Apps

Electronic receipts are issued through the brand's own app. Issuing receipts through the app is effective in enhancing MAU (Monthly Active Users) by making the app more active.

- KakaoTalk (Messaging App)

Customers enter their phone number during payment, and the receipt is issued via KakaoTalk. Issuing receipts through KakaoTalk increases brand account followers, which is effective for marketing.

- KB Kookmin Star Banking (Bank App)

This is the only channel where electronic receipts can be received through non-identification methods (as of May 2024). It is linked to the "Kookmin Wallet" service in the KB Star Banking app. By linking MyData (personal information requiring authentication) and registering cards in KB Star Banking, electronic receipts are automatically issued for payments made with the registered card.

6. Environmental Issues 6.1. Environmental Issues with Paper Receipts - The number of paper receipts issued globally each year amounts to trillions. For example, in the United States, approximately 30 billion paper receipts are issued annually. This figure represents the issuance volume of a single country, and the global scale is much larger.

- The production of paper receipts requires a significant number of trees, water, and energy. For example, in the United States, more than 10 million trees and approximately 21 billion liters of water are consumed to issue paper receipts. Additionally, the annual waste generated by paper receipts amounts to about 384 million kilograms.

- Globally, the total greenhouse gas emissions from the production and disposal of paper receipts are estimated to be in the millions of tons. In the United States, approximately 1 million tons of greenhouse gases are emitted annually.

- By not using paper receipts, about 5,443,000 tons of carbon dioxide (CO2) could be saved, which is equivalent to the emissions of 1 million cars on the road.

- It is estimated that hundreds of millions of printers for issuing paper receipts are used globally. If about 15% to 20% of these are discarded annually, it can be estimated that tens of millions of printers are disposed of each year.

- The surface of receipts contains Bisphenol A (BPA), a chemical that can accumulate in the body and cause health issues such as birth defects, miscarriages, early puberty, diabetes, and cancer. The European Chemicals Agency implemented restrictions on BPA in thermal paper used for credit card slips, tickets, and labels from January 2020.

- Supermarket cashiers, who frequently handle receipts, were found to have twice the level of BPA in their bodies after work compared to before work.

6.2. Electronic Receipts and ESG The adoption of electronic receipts is being used as a key strategy by many companies and countries to achieve ESG (Environmental, Social, and Governance) goals.

6.2.1. Examples of Electronic Receipt Adoption - IKEA Location: Worldwide Details: IKEA has implemented electronic receipts as part of its environmental sustainability goals. Customers can receive electronic receipts via email or mobile app instead of paper receipts at the store, significantly reducing paper use and conserving resources. - Walmart Location: United States, Canada, Mexico, etc. Details: Walmart offers electronic receipt options in several countries. Customers can choose digital receipts instead of paper ones, helping to reduce Walmart’s carbon footprint, enhance customer convenience, and minimize paper waste. - H&M Location: Europe, North America, Asia, etc. Details: H&M has introduced electronic receipts in its global stores to reduce paper usage. Customers can receive receipts via email or the H&M app, supporting H&M's sustainability goals and contributing to environmental protection. - Starbucks Location: Worldwide Details: Starbucks provides electronic receipts to reduce paper usage. Customers can receive receipts through the mobile app, contributing to Starbucks' sustainability and ESG goals. - The adoption of electronic receipts strengthens companies' sustainability efforts, provides a better customer experience, and makes a tangible contribution to environmental protection. This change is spreading globally, with more companies and countries adopting this technology.

6.3 Global Trends - France From August 1, 2023, France has banned the automatic printing of paper receipts. Exceptions include products with a warranty period, services over 25 euros, hotel and restaurant bills, highway tolls, and parking tickets. Sellers can replace paper receipts with digital receipts via text messages, email, or QR codes, although this is a government recommendation rather than a requirement. The French government estimates that the country produces around 30 billion paper receipts annually, including card receipts, detailed item receipts, and vouchers. If only detailed item receipts are considered, 12.5 billion are issued annually, and not producing these could save 150,000 tons of paper. The Agency for the Environment and Energy Management (ADEME) states this could save 25 million trees and 18 billion liters of water annually. - California, USA In January 2019, Assemblymember Phil Ting introduced the Electronic Receipts Act (AB161) aimed at promoting environmental protection and health by mandating electronic receipt systems. This bill required businesses to provide paper receipts only upon customer request. Although the bill was not passed, some major companies like CVS, Whole Foods, and Taco Bell decided to minimize issuing paper receipts. In March 2023, Assemblymember Phil Ting reintroduced a similar bill (AB1347). If passed, businesses not complying with the electronic receipt mandate could face fines of up to $300 per year. The California Restaurant Association expressed concerns that restaurants without electronic receipt systems could face costs of around $35,000. 7. History of Electronic Receipts in South Korea In 2013, the joint research report by companies and universities highlighted the environmental and physical harmfulness of paper receipts, bringing significant attention to the issue. As concerns over personal information management became prominent, electronic receipts began to be commercialized as an alternative to paper receipts. 7.1. History of Electronic Receipt - A research report was submitted through the National IT Industry Promotion Agency (NIPA) to the Ministry of Science, ICT and Future Planning to explain the necessity of electronic receipts and request government support. The report included issues of carbon emissions from paper receipts, environmental hormone concerns, and design plans for an electronic receipt system. This report has since been used as a foundational reference for various studies and reports related to both paper and electronic receipts.

- This means that the issue should be addressed through private sector initiatives and policy support, rather than government projects. - 2014 Electronic receipts were listed as a regulatory reform agenda by the President. - 2014 ~ 2015 R&D and pilot projects for electronic receipts were conducted. - 2019 A National Assembly discussion on the VAT Act related to electronic receipts took place. The Korea Environment Corporation and the Ministry of Environment proposed and submitted research on the 'Carbon Points' system for electronic receipts. - 2020 The Ministry of Science, KT (a Korean telecommunications company), and the Korea Internet & Security Agency signed a business agreement for the widespread adoption of electronic receipts, but it was not fully activated. 7.2. Status of Electronic Receipts (As of May 2024) 7.2.1. Companies Issuing Electronic Receipts - 7-eleven (Note: Global franchise convenience store), Lotte (Note: Major South Korean conglomerate), Hallym University Medical Center, HDC IPark Mall (Note: Major shopping center in South Korea), KT (Note: South Korean telecommunications company), Shinsegae Department Store, Paul Bassett (Note: South Korean coffee franchise), SK Telecom (Note: South Korean telecommunications company), S-Oil, Hana Bank, GS25 (Note: Global franchise convenience store), Kookmin Bank, GS The Fresh, Safe-Zone, Hyundai (Note: Major South Korean conglomerate), CU (Note: Convenience store chain), Galleria Department Store, E-mart (Note: Large supermarket chain in South Korea), ABC-Mart (Note: Shoe retailer in South Korea), Samsung Electronics, Pizza Hut, Tom N Toms (Note: South Korean coffee franchise), JDC Duty Free, Yes24, Starbucks, Daiso (Note: South Korean franchise retail store)

- Kookmin Bank's App (Kookmin Star Bank)

:Unlike the companies mentioned above, it does not handle direct payments but issues 
electronic receipts by receiving payment data through My Data.
:The service can be used within the app's 'Kookmin Wallet', and electronic receipts can be 
issued for all payment methods, not just Kookmin Card.

7.2.2. Companies Providing Electronic Receipt Services - Currently, the electronic receipt business in Korea is mainly operated by The Real Co., Ltd. and Korea Electronic Receipts Co., Ltd. - The Real Co., Ltd.

In 2014, It developed and launched Korea's first electronic receipt service. By leveraging the POS systems of various stores to collect data and issue electronic receipts, it has partnered with major POS companies in Korea and are currently providing services to approximately 14,000 stores. With its network of major POS companies across different industries in Korea, it has the infrastructure to expand our services to 300,000 to 400,000 stores.

In addition to the general 'identification method', it also uses a 'non-identification method', which is a unique technology of The Real. This non-identification method has enabled small businesses to participate in issuing electronic receipts.

- Korea Electronic Receipts Co., Ltd.

Started its electronic receipt business in earnest in 2016 by developing the electronic receipt system for 7-Eleven.

Mainly develops electronic receipt functions for large companies that have their own POS, servers, and apps. However, in this structure, it is difficult to secure payment data.

Conducted extensive promotional marketing with Kim Saeng-min as a model, significantly raising social awareness and recognition of electronic receipts.

However, the business faced challenges initially by providing electronic receipts similar to card company approval details, which did not include detailed items.

- UNLESS

The fintech company UNLESS operated a service that issued card receipts electronically. In January 2019, they started a service in collaboration with KakaoPay, allowing users to receive card receipts via KakaoTalk, quickly gaining about 120,000 subscribers within three months. However, the electronic receipts provided by UNLESS at that time only displayed the card payment amount, like the SMS notification service of card company approval messages. This service, lacking detailed purchase information, was terminated by Kakao in 2023 due to profitability issues.

  Electronic Receipts Subsection: The Real Electronic Receipt Korean Service Provider/Korean Advertising Company 1. History 1.1. 2011~2017

- 2011: The Real Marketing Co., Ltd. (now The Real Co., Ltd.) was established. - 2013: Submitted a research report to explain the need for electronic receipts to government

     ministries and request government support. The report highlighted issues like carbon 
     emissions from paper receipts, endocrine-disrupting chemicals, and proposed the 
     design of an electronic receipt system.

- 2014: Electronic receipts were proposed to the Presidential Regulatory Reform Council. - 2014-2015: Conducted R&D and pilot projects for electronic receipts. - 2017: Selected for fintech convergence service R&D for merchants. 1.2. 2018~2020

- 2019: Invited to the National Assembly discussion on the VAT Act related to electronic

     receipts.

- 2019: Proposed and submitted research on the “Carbon Points” system for electronic receipts

     to the Environmental Corporation (Ministry of Environment).

- 2019-2020: Selected for the Korean Intellectual Property Office IP project (15 additional

          patents applied).

- 2020: Selected for the AI & Big Data (Payments) R&D project by the Ministry of SMEs and

     Startups for two years.

- 2020: Selected for the Smart Parking APP R&D project by the Seoul Business Agency (SBA). - 2020: Awarded the Minister’s Award from the Ministry of SMEs and Startups and the SME

     Federation Award.

1.3. 2021~2023

- 2021: Launched the Smart Parking app. - 2021: Signed electronic receipt service contracts with KT and TOSS. - 2022: Launched electronic receipts for Paul Bassett and Kakao Plus Home. - 2023: Launched electronic receipt services in the KB Star Banking app of Kookmin Bank. 2. Clients and POS Network 2.1. Clients - Introduced electronic receipt services to the first domestic and global franchise company,

Pizza Hut.

- Partnered with the three major telecommunications companies: SKT, LGU+, and KT.

- Additionally, providing services to large clients across various sectors including Maeil

Dairies, Paul Bassett, Tom N Toms, Shinjeon Tteokbokki, Samsung Electronics, JDC 
Duty-Free, S-Oil, Yes24, Ivy Club, and Kookmin Bank.

2.2. POS Network - Integrated systems into over 60% of POS machines nationwide. Established system

networks with major POS companies in sectors such as retail, dining, fueling, duty-free, 
and books, enabling electronic receipt services regardless of industry, brand, store count, 
or size. Excluding convenience stores, large supermarkets, and department stores, over 
80% coverage is achieved in regular stores.

- With its network of major POS companies across different industries in Korea, it has the infrastructure to expand our services to 300,000 to 400,000 stores.

- Also, electronic receipts are integrated and operating in companies using their own POS

systems, such as Yes24 and Pizza Hut.

3. Patent Status The Real Co., Ltd. holds the most patents globally related to electronic receipt technology. 4. Service Features 4.1. Non-identification Method - The Real Co., Ltd. is the only company in Korea issuing electronic receipts using a

non-identification method.

- Integrated the electronic receipt function into the 'Kookmin Wallet' in the KB Star

Banking app. Customers using Star Banking can check their electronic receipts in the app 
when paying with registered cards at electronic receipt-providing merchants. 
Transactions at non-participating merchants can be verified through card receipts with 
brief details such as payment amount and date.

4.2. Choice of Issuance Methods - The issuance channel for electronic receipts can be selected based on business objectives

and circumstances.

- Brand-exclusive app: Recommended for stores with low customer usage despite having

developed a brand-exclusive app. Quickly implementable through API or App In App 
solutions.

- Telecommunication App: Recommended for stores wanting to increase and

activate their inflow into their Kakao channel. Issuing electronic receipts through 
promotional channels for each store/brand allows brand marketing without a separate app.

- Kookmin Bank/KT Telecommunications App (Banking and telecommunication apps)

: Recommended for stores without a 
proprietary app or wanting to introduce electronic receipts without significant additional 
costs. The main advantage is no need for separate app development or integration, making 
it suitable for small businesses. Currently issuing receipts through KB Star Banking 
managed by Kookmin Bank and KT Pass app managed by KT.

4.3. Capable of fast and stable POS implementation - Systems are integrated into over 60% of POS machines nationwide, allowing immediate

adoption upon merchant or franchisee agreement.

- Capable of applying various operating systems and languages, enabling easy new

development even if not partnered with POS providers.

- Stable API allows for new development and launch within two weeks without extensive

development efforts.

5. Expansion Plans for Electronic Receipt Business

- Household Account Book Service

: Based on electronic receipt data, it can automatically record detailed spending details. 
Provides consumers with real-time monthly expenditure information, enabling more 
economical and rational consumption.

- Coupon Service: Frequently used marketing tools like discount coupons or paper stamps

can be added to electronic receipts for marketing activities. Unlike paper receipts which 
are often discarded, electronic receipts have a higher view rate. Even if not viewed 
immediately upon issuance, they are likely to be checked at some point.

- Providing stamps or discount coupons at the bottom of electronic receipts reduces the risk

of loss, ensuring customers can fully enjoy benefits while the store remains continuously 
remembered by customers.

- Big Data-Based Useful Information Service: Contains over 100 types of information in

electronic receipts, useful not only for business purposes but also as national statistical data. 
(e.g., handling situations like the panic buying during the COVID-19 pandemic due to 
inability to monitor stock levels of masks or cold medicine in pharmacies, convenience 
stores, and marts.)

- Analyzes individual consumer information to identify consumption patterns and enables

personalized marketing accordingly. For instance, notifying customers about repurchases 
based on product purchase cycles.

- Expands beyond simple marketing to healthcare areas. Suggests gastroscopy to customers

frequently purchasing digestive aids at pharmacies or sends alerts about products 
containing allergens based on pre-registered allergy information.