South Korea is a titan in the world economy, exploring the cutting edge of technology, finance, automotive and retail through household brands like Samsung, LG and Hyundai. Its eCommerce market, in particular, is a world leader, clocking in as the sixth largest in the world with an annual revenue of $92 billion.
Foreign companies looking to capitalize on this titanic market are running into significant problems, however, particularly in processing payments. One major obstacle is that while 80% of all transactions in South Korea use credit cards, half of issued cards come from a local brand rather than a worldwide provider. This can result in card transaction processing being useful for just 40% of consumers, leaving a vast payments gap. Merchants also face significant challenges when attempting to process Korean transactions from abroad, as the government prohibits the won from being transferred outside the country.
This edition of “Global Commerce Tracker®” examines the surging growth of the South Korean eCommerce market. It also explores what Korean consumers look for when it comes to eCommerce and the challenges foreign merchants face when entering this colossal market.
Around the Global Commerce Space
South Korea’s status as an economic powerhouse is growing even more solidified, with a recent study finding that it is now the tenth-largest market for luxury goods in the world. The size of this market expanded by 29.6% year over year to hit $5.8 billion in 2022, and experts predict this growth will continue, hitting $7 billion by 2024. Foreign luxury goods, in particular, are a hot commodity, seeing a sales growth of 37.9% year over year. Experts said this growth was primarily driven by pent-up demand during the ongoing pandemic, augmented by millennials and Generation Z comprising a larger fraction of the spending economy.
South Koreans have grown more technologically adept throughout the pandemic, especially with using mobile financial services. The proportion of Koreans leveraging these services increased to 65% in 2021, up from 57.1% before the pandemic. Another 42% said they had increased their use of these services, although the exact methods varied by demographic. Individuals younger than 40 and households with annual incomes of less than 30 million won ($23,740) preferred mobile banking, while individuals in their 20s preferred debit cards.
For more on these and other stories, visit the Tracker’s News and Trends section.
GiftBasketsOverseas.com on the Unique Challenges of South Korean Payments and eCommerce
Conducting business in South Korea can often seem deceptively simple from an outside perspective, considering the country’s close ties to Western businesses and organizations. However, merchants attempting to expand into South Korea are immediately faced with the dizzying variety of payment options available from both internet banking services and local credit cards.
In this month’s Feature Story, PYMNTS talked to Dmitriy Peregudov, founder of GiftBasketsOverseas.com, about how the company dealt with the challenges of entering the South Korean eCommerce market.
Meeting the Challenges of the South Korean eCommerce Market
One of the biggest industries in South Korea is eCommerce. When the pandemic shut down brick-and-mortar shopping, the country saw the same surge in eCommerce popularity as the rest of the world. Foreign investors and merchants are pouncing on the opportunity to cater to the Korean market, but they still face several regulatory and institutional challenges.
This month’s PYMNTS Intelligence explores the growth of eCommerce in South Korea in the past several years, the challenges foreign merchants face in the industry and how full-service payments solutions driven by application programming interfaces can help them get their foot in the door.
About the Tracker
The “Global Commerce Tracker®,” a PYMNTS and Worldline collaboration, examines the surging growth of the South Korean eCommerce market and the challenges foreign merchants face when entering this colossal market.