3 reasons why you WON'T pay online in Korea

A Korean American friend recently came over to ask me to buy a round trip bus ticket for her online. The process was simple--you  pick your destination, time, and insert your credit card number. The entire process took me less than 5 minutes, but it took my Korean American friend at least 10 minutes to just find her destination on the website. I have had many instances of my foreigner friends coming by with their credit cards, asking me to help them buy something on the Internet. These people usually knew what they were looking for but simply did not know how to find the products, services, and tickets. Even when they knew the exact url of the product, they failed  in completing payment online. As a result, my non-native friends either had to bank transfer or not make a purchase at all. Before diving into the specifics of why foreigners will not or cannot pay online, here is a brief example of how Gmarket handles its foreign shoppers.

1. Gmarket features its website in English: Gmarket has its own English website. However, compared to the Korean Gmarket, the number of products are significantly limited, and types of product rarely get updated.

2. Gmarket processes payment using Paypal: To pass the local online payment barriers, Gmarket uses Paypal to process payment for foreigners. However, Paypal has two critical flaws that discourage users from completing their transaction. First, Paypal does not accept the Korean won. Foreigners in Korea have local accounts and receive their pay in the Korean won. However, since Paypal only accepts payment in dollars, foreign shoppers will be subjected to the volatile currency rate between the won and US dollars. Second, not everyone has a Paypal account. Shoppers will not want to set up another  account just to buy an item on Gmarket. Because of the reasons above,  foreign shoppers do not spend enough money, and this is why Gmarket does not invest much time on expanding its English site.

So why is Gmarket using Paypal which deters sales? Why doesn't it use another payment solution that actually accepts the Korean won?

Below, you will find top 3 reasons for what's stopping foreign shoppers from making an online payment as well as why Gmarket uses Paypal.

1. Foreigners do not want to install security and anti fraud applications

In Korea, 75% of online sales come from payments made using local Korean bank cards, and most foreign residents prefer to pay using these cards as well. Now, local Korean banks require the users to install various security and anti fraud applications, which are the first barriers to foreign shoppers completing their transaction. In most Korean e-commerce websites, after clicking on the 'Pay Now' button, a yellow tab will show on top of your page. The tab says in Korean that you need to install some secure pay application. For Gmarket, after that application is downloaded, you are forwarded back to the main page, and all the information you typed for delivery will be erased. Let's say that you patiently retype all of the information and click "Pay Now" again. Then, a pop up page will appear with a choice of banks. Usually, you will need to install another keyboard security application before you can further process payment. DealKo's payment gateway provider, Paygate, has successfully negotiated with most banks to skip the application installation process. However, KB, Korea's largest consumer bank, still requires security applications even through Paygate.

2. Most local cards do not have their payment solution in English

After installing the various security applications, you will realize that the payment gateway runs completely in Korean. There are times when the "choose your card's bank" page is conveniently in English. However, all pages after, including the pages where you need to type in your card number, cvc number, and a temporary password, are all in Korean. Furthermore,  each local card has its own unique payment processing system, making online credit card payment even more difficult for non Korean speakers.

3. Digital certificate required for online payment is not easy to get

Certificate for online payment is required for all local banks' transaction. For credit card and debit cards, a digital certificate is only required for values over 300,000 won. However for real time bank transfers (currently the most preferred method of payment by foreign residents), a digital certificate is required every time. Even Paygate is still in its preliminary process of negotiating with banks to not require digital certificates. Simply put, requirement for digital certificates  is not going to go away any time soon.

So what kind of payment gateway will encourage spending from foreigners?

Any foreigner targeting to start an e-commerce website based in Korea will need to look for a gateway that provides the following:

1. Local offerings: The solution needs to easily connect to all the important payment options in South Korea.

2. Strong local presence: All local authentication processes need to be supported

3. Customization: Payment Page needs to be fully customizable. There are already several payment solution companies that fulfill the 3 requirements mentioned above. However, the pitfall is that locally registered companies are still required by the Korean law to follow the authentication process laid out by Korean banks. In other words, these payment solution companies' services can only be enjoyed by companies based outside of Korea.

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Before being concerned about online payment, you'll first need to provide products and services that people would want to buy. What I've realized through my time in DealKo, consumers will walk to the bank to transfer money if they want the product or service badly enough.