South Korea has for decades been an innovator in Asian-Pacific payment systems, beating Japan to the introduction of mobile payments, and leading a region that accounts for 40% of global payments revenues, and is expected to account for 56% of further revenue increases in the five years to 2019.
But there has always been a catch. When it introduced internet banking in 1992 it was a cumbersome process, requiring multiple menus to be accessed to make a payment, and the two main systems for transacting were not compatible.
Even today, much of the South Korean online payment system suffers from the legacy of its government adopting Microsoft’s ActiveX controls in the 1990’s, to secure its online authentication process.
The way online shopping was not meant to be
It means online shoppers and internet bankers have to go through an arduous process to complete a purchase or ecommerce transaction for anything more than 300,000 won ($US270). It also means anyone wanting to use online payment services must use Internet Explorer, which is a bit of a problem for Apple users, and foreigners accessing South Korean retailers require a digital certificate.
Earlier this year the South Korean government finally announced it will be remove ActiveX, initially in the country’s 100 most popular web sites by 2017, with further plans to drive the change through government sites, and remaining online payments systems.
That follows the mid-2014 move by the South Korean Financial Services Commission
to remove the mandatory use of Public Authentication Certificates
in lieu of financial firms own authentication systems, which was primarily aimed at enticing foreign online buyers.
The changes are long overdue for a nation that boasts broadband subscribers in 95 per cent of households, a mobile market dominated by 4G LTE
since its introduction in 2011, and a goal to bring gigabyte speeds to internet connections.
It’s also a change that Microsoft would have made for South Korea anyway, as it has removed
ActiveX in its new Edge web browser in the Windows 10 operating system.
This explains why South Korea has an ecommerce deficit, as its population spreads out to gobble up international shopping bargains, while its retailers miss out on easy access to nearby mega markets like China.
Online shopping giants adopt predatory stance
One click shopping is heading for South Korea. Kakao Talk
, South Korea’s largest messenger app with over 100 million national and international subscribers, and China’s Alipay
have announced initiatives to handle mobile payments by becoming electronic payment issuers under Korean law.
There is still a lot of work to do to strip the AxtiveX legacy and integrate cross border payments for international cardholders. Local one-click solutions like KakaoPay
, which claims to have signed up over 5 million customers since launching in September last year, offer even simpler payment options to Alipay and Paypal
, but merchant acceptance is still a deterant.
But for an advanced economy, South Korea is still an interesting ecommerce and new age payments platform market yet to be fully exploited.
As the world’s 30th richest nation
by per capita GDP, South Korea’s ecommerce trade is forecast
to grow from $US29.3 billion in 2013 to nearly $US50 billion in 2018, according to statistics portal Staista
. That respectively represents 8.1 per cent and 12 per cent of forecast total retail sales in South Korea. In comparison, Australian’s spent $17.5 billion ($US12.66 billion) on online retail in the 12 months to August 2015, according
to the NAB online retails sales index. That was equivalent to 7.1 per cent of sales at bricks and mortar retailers.
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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