Korea is one of the most wired nations in the world. It is the world leader in terms of Internet connectivity and speed. But when it comes to electronic commerce, it is still a laggard.
Korea’s Internet economy is small compared with other countries. In Korea, online shopping accounts for a mere 0.24 percent of gross domestic product, much smaller than 1.68 percent in China and 1.6 percent in Japan.
Korea’s backwardness is also manifested on its trade balance. Korea posted a record trade surplus of $44.1 billion last year. But in online trade, it registered a deficit of 720 billion won ($670 million).
Many analysts attribute this to the government’s regulations requiring the use of public authentication certificates in making online transactions.
In Korea, anyone who wants to purchase goods or services worth more than 300,000 won online is required to prove their identities using electronic certificates issued by a government-appointed certifying agency.
This system was introduced in the late 1990s. At the time, Korea was ahead of other countries in online security. But the mandatory use of public certificates has stifled competition to develop more advanced security solutions, making Korea a backwater in this field.
One big problem with this system is that it is based on Microsoft’s ActiveX technology, which is supported only by Internet Explorer. As a result, people using other browsers, such as Google’s Chrome, cannot use it.
Furthermore, ActiveX is vulnerable to security threats. The Korean system requires users of Internet banking services to download bank-developed proprietary security software, typically an ActiveX plug-in.
This mechanism has led hackers to develop computer viruses, spyware and adware programs disguised as ActiveX plug-ins to deceive consumers. As a result, Korea has become the largest source of malware in the world.
Another serious drawback is that it is very difficult for foreigners to get identity certificates issued here, as the whole system was designed for Koreans, with little thought given to people abroad.
Stuck with this outdated e-commerce system, Korea has been unable to benefit from all the advances made in browser and security technology. Many Internet experts and online companies have called for reform, but to no avail.
Yet things have recently begun to change. President Park Geun-hye referred to these problems in her nationally televised meeting last week on deregulation with ministers and businesspeople.
What brought the issue to her attention was a recent TV drama, “My Love from the Star,” which created a craze in China. She heard that Chinese fans of the show could not buy the coat that the heroine of the drama wore due to the difficulty in getting public certificates. So she told officials to find ways to address these problems.
Much of the blame for the current situation can be put on the financial regulator, which has never bothered to reform its online regulation, dubbed a “Galapagos regulation” as developed without connection to the rest of the world and is not found outside Korea.
Many experts note that it should be left up to financial institutions and e-commerce companies to choose which security solutions they use.
This approach drives companies to invest in developing technologies to ensure that online transactions at their sites are convenient and secure. Amazon is a case in point. The world’s largest online retailer owes much of its success ― and revenues ― to the development of its convenient 1-Click payment system.