More than one in five North Koreans have cell phones, and increasingly rely on them to conduct financial transactions. Many of these transactions involve trading cell phone airtime, or “phone money,” for goods and services, and even for offering bribes. This report examines the potential for airtime trading to evolve into a formal mobile money system, which could enhance market activity and stability while providing opportunities for the country to engage with the international community.

A man talks on his mobile phone while walking in downtown Pyongyang on December 15, 2018. (Photo by Dita Alangkara/AP)
A man talks on his mobile phone while walking in downtown Pyongyang on December 15, 2018. (Dita Alangkara/AP)

Summary

  • With the significant rise in cell phone use during the Kim Jong Un era, North Koreans have come to increasingly rely on cell phone communications for financial transactions, using mobile airtime as a proxy for cash when transferring funds or making small, on-the-spot purchases of common goods and services.
  • Such transfers are popular because of their reliability and ease. The high cost and inconvenience of purchasing more call minutes, or “phone money,” coupled with the ease of transferring them, has created a secondary market for airtime.
  • Airtime transfer has the potential to evolve into a formal mobile money system. This would give the market access to reliable and convenient funds transfer and digital payment services.
  • A successful mobile money system is still far away, however. North Korea would need to raise the mobile penetration rate, make massive initial investments, adopt customer-friendly service, and address lack of trust in official financial institutions and the won.
  • These changes could help open North Korea, providing valuable opportunity for the international community. As nations explore new ways to induce the country’s denuclearization and encourage economic and social reform, a mobile money system could be a new opportunity for engagement.

About the Report

The airtime transfer system in North Korea has the potential to evolve into a formal mobile money system that would enable customers to deposit, send, and withdraw funds on their mobile phones. Such a development would require reforms that could open the country and provide valuable opportunities for international influence. Supported by the North Korea program at the United States Institute of Peace, the report is based on interviews with North Korean defectors, news reports, and related literature.

About the Author

Yonho Kim is an associate research professor of practice and associate director of the Institute for Korean Studies at the George Washington University. A specialist in North Korea’s mobile telecommunications and U.S. policy toward North Korea, his findings have been published by the Wall Street Journal, The Atlantic, Yonhap News, and Libération, among others.

Related Publications

Three Conditions for Successful Engagement with North Korea

Three Conditions for Successful Engagement with North Korea

Monday, March 25, 2024

By: Mark Tokola

The September 13, 2023, meeting between Vladimir Putin and Kim Jong Un in Russia’s Amur Oblast marked a significant crippling of the decades-long U.S. pressure-based approach toward North Korea. The strategy of isolating and pressuring North Korea through United Nations Security Council resolutions to compel its nuclear disarmament in exchange for providing normalized relations, economic aid and sanctions relief may or may not ever have been a winning strategy, but now is no longer viable. The strategy required cooperation among the United States, South Korea, China and Russia, but this now seems a distant prospect.

Type: Analysis

Global Policy

Building Trust through Health Cooperation with North Korea

Building Trust through Health Cooperation with North Korea

Monday, March 18, 2024

By: Kee B. Park

The United States needs to address the existing trust deficit with North Korea if it wants to coexist peacefully with that country. Trust building through health cooperation may be the least contentious way politically and the most likely to succeed. However, engagement on health and humanitarian assistance with North Korea, like security negotiations, has been undermined by geopolitics.

Type: Analysis

Global Policy

Climate Change as a Path to Engagement with North Korea

Climate Change as a Path to Engagement with North Korea

Monday, March 11, 2024

By: Troy Stangarone

Since North Korea broke off talks with the United States after their 2019 meeting in Stockholm, progress in engaging Pyongyang on its nuclear weapons and other issues has stalled. The pandemic likely played a significant role in cooling engagement, but Pyongyang’s growing relationship with Russia has further reduced its incentives to engage with the United States.

Type: Analysis

Global Policy

Increasing Stability in a Deterrence Relationship with North Korea

Increasing Stability in a Deterrence Relationship with North Korea

Monday, March 4, 2024

By: Adam Mount

A Korean Peninsula free of nuclear weapons remains a critical U.S. national security interest, but it is now a long-term interest. Because there is little possibility of disarming the regime in Pyongyang at an acceptable cost in the foreseeable future, the United States-South Korea alliance needs a strategy to coexist peacefully with a nuclear-armed North Korea.

Type: Analysis

Global Policy

View All Publications