Accessing South Korea; one of Asia’s most digitally advanced markets | Blog
14 / 06 / 2022
South Korea is currently the 3rd largest e-commerce market in Asia 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, 85% have smartphones and the country itself boasts a 97% internet penetration rate, the highest in Asia.
These help to power an e-commerce marketplace valued at US$ 96 billion in 2020 and estimated to exceed US$ 242 billion by 2025. Mobile shopping has also surpassed 65% of the total value of the wider e-commerce marketplace, according to Statista, 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.
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.
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 if the consumer pays with a specific credit card (source: Austrade).
Additionally, because payments are processed locally, businesses do not need to pay for 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 Worldline can maximise the opportunities for international internet retailers and help them avoid the pitfalls facing their unwary or unsophisticated competitors.
Barriers to Entry
In order to process payments locally in South Korea, like many other countries, businesses are required to set up a local entity which can, in some instances, take months. 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.
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 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.