South Korea Payments Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Key Highlights

• The payment services of South Korea were heavily dependent on the paper-based payment instrument. However, The expansion of e-commerce transactions and the introduction of Internet banking in the country has accelerated the shift toward a further diversification of the range of electronic payment.
• Many global and local payments players are growing their business in the South Korean Payment market because of the increasing online payment demands from e-commerce websites, which link these players to the global marketplace. For instance, In March 2022, Citcon, a mobile wallet payment provider, announced the expansion of its E-commerce Payments Presence to South Korea and Japan. This expansion will allow the merchants to enter the global market and further expand their offerings to the fastest-growing markets.
• The rapid increase in smartphone penetration enabling users to pay through different payment apps and online websites has boosted the payment market in South Korea. Various payment players are looking forward to partnerships to further increase cashless payments in the country. For instance, In September 2020, Mastercard Inc announced its partnership with Samsung Electronics and Samsung Card for the launch of the Samsung Pay Card in South Korea. Mastercard’s expansion in South Korea has accelerated digitalization with the boost in the regional economy, propelling the growth of contactless transactions.
• Moreover, the Covid-19 pandemic has reinforced major shifts in payment behavior by declining the usage of cash payments, switching from in-store to online payment methods, and adopting instant payments. These transitions have created new opportunities for payment players in South Korea.

Key Market Trends

Retail Industry to Drive Market Growth

• The payment market in South Korea is developing with the changing customer behavior. Trends such as mobile payments, internet banking, instant payments, e-commerce, and the growing impact of regulatory agencies are affecting the payment market in the country.
• Th Covid-19 pandemic accelerated the growth of the e-commerce market in South Korea, and this led to the wide use of online payment sites and cashless payment options. The users found it suitable and easy to use payment methods during online shopping and transactions.
• The growth opportunity is attracting international companies to launch their business in South Korea, further driving the payment market. For instance, In January 2022, Apple joined Google by allowing third-party developers to offer their alternate payment services for purchases made through the App Store. The two companies are now in compliance with the South Korean Telecommunications Business Act, which refrained the companies due to app payment monopolies.
• Online retailing in South Korea for various needs like food and beverages, clothing, household items, and others have attracted the market players to expand their business through strategic acquisitions and partnerships. For instance, In May 2022, Carrot, a digital insurance platform in South Korea, announced a partnership with Naver Financial Corp. (Naver) in order to support the distribution of shopping return insurance for the merchants of Naver's online shopping platform, Smart Store.

Significant Growth in Payment is Expected due to Digital Transformation

• Digitalization is enhancing processes by leveraging digital technologies and digitalized data. It advances efficiency and productivity and reduces costs for a business. Many developed and developing countries, including South Korea, are adopting digitalization to boost their economy and promote contactless services.
• The government is taking initiatives in order to boost digitalization in the country because of the growing demand for the country to connect digitally to the world, resulting in a boost in the digital economy. For instance, In July 2021, the World Bank's Digital Development Global Practice launched The Korea Digital Development initiative (KoDi). The three-year initiative will help the low-and middle-income countries accelerate the digital transformation that is data-driven, secure, and green by sharing information on recent reform practices and providing country-specific technical assistance.
• The government has also partnered with IT companies to further advance and develop the digital infrastructure. For instance, in April 2021, Cisco announced its partnership with South Korea's government to accelerate digitalization initiatives. Cisco will invest in 5G, cloud computing, smart factories, and IT skill development through this partnership. The initiative is aligned with the country's digital new deal strategy and the government's Industry - 4.0 policy that will better prepare the economy and south Koreans for the tech-centric industrial revolution.
• Moreover, in January 2021 South Korea Government announced to spend 12.7 trillion won (USD 11.7 billion) as a part of its digital New Deal program with an aim to foster new technology industries. Furthermore, In 2020 the government introduced an ambitious stimulus project under the Korean New Deal initiative for an amount of 160 trillion won till 2025.

Competitive Landscape

• In January 2022 - NAVER Corp. launched the Commerce Solution Market beta service, which will offer various 3rd party solutions to offer various third-party solutions for SME business operations. The platform helps Smart Store sellers in scaling up their business by partnering them with tech startups to provide a suite of advanced technology services that automate business operations.
• In December 2021 - South Korea collaborated with the Singapore government across several areas, including cross-border online payments, data flows, and artificial intelligence (AI). The partnership will help the countries establish digital trade rules to drive interoperability between digital systems.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support