Local payments are key to South Korean e-commerce
Among the most mobile-centric countries in the world, South Korea is a ripe opportunity for e-commerce merchants provided they learn the groundwork, namely payment localization.
With the world’s 10th highest gross domestic product (GDP) and around 93% smartphone penetration in a population of 50 million people, it’s a connected economic playground for traders with friends around the world. countries and third-party partners who can help navigate the unique aspects of selling in this part of Asia.
According to Michael Bilotta, global head of digital goods and services at Worldline, the e-commerce market in South Korea is worth $96 billion a year “and 65% of that is transacted on mobile”.
Payments today are a mix favoring digital and cards, with Bilotta telling PYMNTS’ Karen Webster that 20% of e-commerce transactions are made through e-wallets – Naver Pay is a major local wallet with around 75% of the market, he said – and “the other 80% are cards. Forty percent of those co-brand with Visa and Mastercard, and the remaining 40% are South Korea-based issuers.
Calling subscription payments “super prevalent in South Korea,” Bilotta said “the market is not growing by leaps and bounds like we might see in Latin America, for example. But when I look at space and as I look at the opportunity for merchants to expand and capture wallet share, it really comes down to being able to offer these local payment methods.
“If you just go to South Korea with Visa and Mastercard, there’s 60% of the market you’re just not capturing,” he added. “That makes it quite difficult to build a critical mass in the country.”
See also: Resumption of travel in South Korea makes the case for localized payments
“Obliterate” the old ways
E-commerce merchants are right to value South Korea for expansion, and while it’s prime territory for cross-border growth, playing on local preferences is non-negotiable.
“If you don’t offer these local payment methods, [but] then one of your competitors [is]or even if someone in a slightly different space also offers them, the customer is going to look to options that allow them to use those payment methods,” Bilotta said.
He noted a statistic that up to half of consumers, depending on the region, will abandon a shopping cart if they don’t immediately see their local currency.
“If you as a merchant are not set up to use local currency from a cash and back-office perspective, you cannot price your products and services in local currency,” he said. he declares. “You also eliminate the possibility of accessing local payment methods, which is almost insurmountable.”
Companies like Worldline are working to change the old economy of merchants expanding into new overseas markets by taking the end-to-end, location-infused digital path.
Recalling the traditional path of setting up an office and hiring local employees, Bilotta told Webster: “All of those things are… the old pattern that we’re trying to eradicate as the norm. The solutions that Worldwide is trying to find in these expanding markets, South Korea being the pinnacle of them, are the ability to enter the markets without the need to have a local entity, while respecting all the legislations local and other requirements.
Read also: Localized payments connect South Korea’s eComm sellers to the world
From fraud to finance, know your stuff
Fraud risk is typically heightened when entering foreign markets, and Worldline’s recent partnership with Microsoft Dynamics 365 Fraud Protection is a major step in securing its growing number of users and use cases in Korea. South. It is the first payment service provider to do so.
“With Microsoft and its fraud tool, everything is based on machine learning,” he said. “The real engine of the solution revolves around all the data that [Microsoft has] and the machine learning algorithm capable of continuously monitoring transaction history across the portfolio and for specific merchants to ensure they can anticipate fraudulent behavior.
Armed with powerful new fraud-fighting tools and a warning about the criticality of local payment options, businesses expanding in South Korea have yet to prove that the return on investment (ROI) justifies the expense.
“The first thing you would look at is, what is my success rate? What is the authorization rate of the payment I’m going to make? Going locally in South Korea based on the data we have will offer a 4% increase at 6% of the clearance rate from the start,” Bilotta said.
“Then you have access to the new cards, and you say, ‘OK, that’s 60% of the market opening up.’ We project what that means in terms of initial penetration and what it may become.”
Using local payments helps with ROI as cross-border fees are eliminated.
Worldline provides due diligence information “that our merchants wouldn’t have access to,” he said. “They don’t have the data from Visa, they don’t know what the increase in the authorization rate would be. The synopsis [is that] you reduce your costs as much as possible based on what you are allowed to do from a tax and compliance perspective,” he explained.
“Going local to a market where you know you have customers, or want to grow, is really the only way to do that,” he said, adding that new markets are “payment-based local”. This isn’t 2010 where you just slap cross-border Visa or Mastercard and say, “I’m going around the world.” Not going to work. There is too much competition with e-commerce these days. »