Why you should reconsider your payments operations in advanced markets like South Korea | Blog
14 / 06 / 2022
South Korea is currently the 6th largest e-commerce market and the 10th largest economy globally. A high-tech, cultural behemoth with an affluent population, superior infrastructure, and one of the most advanced smartphone markets in the world. Of a population of over 50 million, 97% have smartphones and the country itself boasts a 97% internet penetration rate. So Why you should reconsider your payments operations in advanced markets like South Korea.
Accessing South Korea - one of Asia’s most digitally advanced markets
These trends help to power an e-commerce marketplace valued at US$ 94 billion in 2022 and estimated to exceed US$ 116 billion by 2027, according to Statista.com. Mobile shopping has also surpassed 74% of the total value of the wider e-commerce marketplace, and looks set to continue on this impressive growth trajectory. South Korean consumers are also extremely tech-savvy, becoming ever wealthier and sophisticated purchasers of everything from gaming to lifestyle goods and luxury travel. So, why you should reconsider your payments operations in South Korea.
It is no surprise that it continues to attract international businesses. In this blog I’ll explain key payment trends, challenges and opportunities businesses face hoping to capitalise on this rapidly expanding marketplace, as well as some important learnings since launching our solution a year ago.
Understanding the local payment landscape
Online businesses who want to succeed in South Korea need to understand the local payment landscape. For example, 80% of the online payment marketplace is dominated by cards. Half of these are local cards while the remaining 50% are co-branded.
Given the market’s potential, credit card companies in South Korea are moving swiftly to build a safer and more convenient international payment system for Korean consumers. Credit card companies such as Shinhan Card, Lotte Card and KB Kookmin Card have developed diverse benefits through collaboration with internet retailers and they offer discounted prices and payback deals if the consumer pays with a specific credit card (source: Austrade). In fact, in 2021, Lotte Card launched a new credit card series that aims to offer the best deals for shopping, dining out and more for millennials and Gen Z customers. As you can see, local cards offer specific benefits to Korean consumers based on their shopping behavior and preferences. Local cards can therefore improve the payment experience, driving up approval rates and online sales.
Additionally, because payments are processed locally, businesses can minimise card fees arising from international card schemes, and consumers do not need to pay for the additional cardholder surcharges that arise from paying through such methods. On the consumer side, this increases payment conversion since some consumers are not aware of this surcharge and question these additional charges once they see them on their bank statement.
Through a thorough understanding of the South Korean market and local partnerships, Worldline can maximise the opportunities for international internet retailers and help them avoid the pitfalls facing their unwary or unsophisticated competitors. In fact, after piloting our solution with a global marketplace and a a leading gaming company, our data has shown that our solution has been able to increase their approval rates by up to 5%, depending on the industry of the merchant.
Barriers to Entry
Localisation is vital for any business to grow its global revenue. However, setting up a local entity is complex. Alongside that lies the perennial issue of having to understand and adapt to a very distinct language, culture, business practices and local regulations – each of which is critical to operating successfully in this marketplace. It is essential that merchants who want to expand into South Korea find a partner that can help them access this market without having to worry about setting up a business entity and all the complexity that comes with it.
Furthermore, payment authorisation is done in the local KRW currency, but because it is a restricted currency and cannot be repatriated outside of the country, there are some deep-rooted issues and complexities that need to be addressed when looking to provide the merchants and their consumers with the optimal ‘payment experience’.
Merchants in particular want swift, secure and seamless access to their revenue streams back in their country of origin. This is important because Asian currencies are more volatile than USD and EUR which can impact FX rates negatively and reduce overall revenues. For example, it would be of significant benefit to have access to guaranteed rates, fixed intraday, enabling merchants to repatriate their funds without hindrance. Again, the local knowledge we acquired in South Korea through dealing with partners who understand these issues and know how to navigate them, is paramount.
The right partner for accessing South Korea
South Korea is clearly one of the most interesting economies in the world and an increasingly sophisticated one. Consumers are becoming ever more demanding in the level of service they receive throughout the purchasing process. They want slick yet efficient choice and options for how, when and where they pay, particularly online. Any merchant seeking to capitalise on this tremendous pent-up demand needs to understand the rules, follow the trends and deliver on expectations. Partnering with Worldline can help them achieve these ambitions.
Do business like a local
Supporting expansion into South Korea is part of Worldline’s strategic approach to helping businesses target high-growth markets around the world, such as India, China, and Latin America. We help you address these unique domestic e-commerce ecosystems, which often have barriers to entry that demand specific solutions tailored to local consumer preferences and regulations. Our latest payments solution is targeted at retail, marketplaces, digital, gaming & media and travel businesses.
Our goal is to help you do business like a local – removing complexity and boosting profitability in the process.