Payment methods in South Korea 🇰🇷

As the digital wave continues to reshape the global economic landscape, South Korea stands as a sterling testament to the seamless integration of technology in daily transactions. In a society where cash is increasingly seen as cumbersome, electronic payments have become an intrinsic part of the retail experience. From traditional card payments to the burgeoning Buy Now Pay Later (BNPL) sector, South Korea’s digital payment ecosystem is a confluence of innovation and consumer-centric solutions. This blog post delves into the various facets of South Korea’s payment landscape, highlighting the trends and key players.

The Korean market is highly penetrated by electronic payments. Here are some updated facts for 2023:

• The growth of the card payments market in South Korea is set to slow to 5.9% in 2023, reaching KRW1,176.6 trillion ($988.4 billion) due to rising inflation impacting consumers’ disposable incomes​¹​.
• As of February 2023, cards account for 66% of the payments in South Korea, while digital wallets constitute 22%​²​.
• South Korea boasts the highest credit card usage rate globally, with a significant 148.3 credit card transactions per capita as of 2021​³​.
• The mobile payment market in South Korea is projected to grow at a CAGR of 9.13% during 2023-2028, with key players like Kakao Pay, Naver Pay, Samsung Pay, Toss, and PayCo dominating the landscape​⁴​.

Payment by card in South Korea

In 2023, South Korea’s e-commerce sector witnesses steady growth. Card payments dominate, reflecting a trusted payment method among consumers​¹​. The card payments market sees a 5.9% growth, reaching KRW1,176.6 trillion or about USD 988.4 billion, despite rising inflation impacting disposable incomes​²​.

Interestingly, card penetration in South Korea remains high, with an astonishing 6.7 cards per person, constituting 70% of all payments​³​. Predominantly, consumers favor locally issued cards, either single-branded or dual-branded with international giants like Visa and MasterCard​³​.

KB Kookmin Card and BC Card emerge as local card stalwarts, enhancing the user experience for both domestic and international shoppers​⁴​​⁵​. Specifically, KB Kookmin Card opens avenues for international merchants aiming to tap into the South Korean market​⁴​. On the other hand, BC Card, as the largest payment processing entity, offers comprehensive payment services to local merchants and financial institutions​⁵​.

Furthermore, nine domestic card networks operate in South Korea, mostly run as three-party schemes, enabling a streamlined card payment process​⁶​. These networks, administered by thirteen Value Added Networks (VANs), ensure a seamless connection between merchants and card networks​⁶​.

Moreover, alternative payment methods like Naver Pay and Kakao Pay witness an uptick, yet they still trail behind the entrenched card payment culture​⁷​. The robust technological infrastructure in South Korea significantly bolsters the dominance of card payments in e-commerce​⁷​.

Local actors: KB Kookmin Card, BCcard, Tmoney, CashBee, Lottecard

      

 

Payment by bank transfer

In 2023, South Korea’s e-commerce landscape continues to diversify with bank transfers holding a significant yet declining stake. The allure of bank transfers, rooted in convenience and secured payment experiences, remains notable yet overshadowed​¹​. Direct debit, closely aligned with bank transfers, ranks among the top payment preferences alongside credit cards​²​. Platforms like Citcon bridge the traditional with the digital, enabling direct bank transfers alongside popular digital wallets like Toss and KakaoPay​³​.

Online banking services, provided by central banks, facilitate a variety of bank transfer options, opening doors for both locals and international visitors to engage in e-commerce​⁴​. Yet, the ease of online bank transfers through major banks doesn’t eclipse the rising trend of card payments and digital wallets​⁵​.

As consumers lean towards cards and alternative payment tools, the share of bank transfers in e-commerce payments sees a dip from 12.7% in 2021 to 8.4% in 2022​¹​. Despite the decline, bank transfers remain a reliable, albeit less favored, channel for e-commerce transactions.

Local actor: Toss payments

 

Payment by installment and BNPL

In 2023, South Korea’s e-commerce sector witnesses a notable rise in Buy Now Pay Later (BNPL) payments, reflecting global payment trends​¹​. Platforms like Naver Pay and Kakao Pay lead this trend, offering BNPL services to their users, thereby increasing transaction volumes substantially​²​​³​. Additionally, emerging platforms like Openull join the fray, securing funding to enhance their BNPL offerings, showcasing a positive growth trajectory​⁴​.

The projected annual growth of BNPL payments is approximately 23.2%, reaching a value of US$12,058.8 million in 2023​¹​. This growth springs from increased e-commerce penetration and changing consumer payment preferences towards more flexible solutions​⁵​. Amidst this, Coupang initiates a BNPL-like program, further enriching the BNPL ecosystem in South Korea​⁶​.

However, a shift in payment preferences is evident as consumers increasingly lean towards digital payment methods like e-wallets alongside BNPL schemes​⁷​. The flourishing BNPL market in South Korea, marked by strong growth and the continuous entry of new players, aligns well with the globally evolving digital payment landscape.

Local actors: Kakaopay, Naver Pay, Flexpay, Toss payments, Openull

       

 

Payment by digital wallet and X-Pay

In 2023, South Korea’s e-commerce witnesses a sharp rise in e-wallet payments, embodying a global cashless trend​¹​. Platforms like Samsung Pay lead, offering seamless contactless transactions, fueling this growing preference​²​. Moreover, Kakao Pay emerges as a preferred choice, showcasing the public’s trust in digital payments for online shopping​²​.

A high card penetration in South Korea sets a sturdy base for this digital transition, with 70% of payments now digital​³​. Concurrently, mobile wallets become mainstream, indicating a shift in payment preferences towards more tech-savvy options​⁴​.

Furthermore, innovative platforms like Naver Pay join the fray, broadening the e-wallet ecosystem, thus making online shopping a breeze​²​. The government too steps in, launching mobile payment system Zero Pay, further simplifying digital transactions for both vendors and consumers​²​.

The substantial transaction value of US$205.40 billion in digital payments in 2023 underscores the massive adoption of e-wallets​¹​. The trend, supported by favorable regulations, not only reshapes South Korea’s e-commerce landscape but also ushers in a new era of digital commerce, primed for further growth.

Local actor: Samsung Pay, Naver Pay, LG Pay, Payco, Kakaopay, Zero Pay

          

 

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