E-commerce platforms should drop Korea-registered phone requirements for overseas buyers: BOK

Shoppers look around a BTS booth set up at a Shinsegae Duty Free store in Seoul, July 18. Yonhap

Korean consumers' direct online purchases of foreign goods grew significantly in 2024, reaching 8.1 trillion won ($5.8 billion). In contrast, overseas consumers spent only about 1.6 trillion won on Korean products — roughly one-fifth of that amount.

The low figure suggests that the strong demand for Korean products, driven by K-content's popularity, has yet to be fully reflected in actual sales, according to a report from the Bank of Korea (BOK) on Monday.

As it turns out, many overseas consumers struggle to access the products because most Korean e-commerce platforms require users to verify their identity with a Korea-registered mobile number, even though it's not legally mandated. This practice makes it difficult for users outside Korea to create accounts.

"These practices are largely rooted in past conventions," said Choo Sung-woo, a senior economist at the BOK and one of the report's authors. "Platforms also rely on collecting personal information to enable targeted marketing toward individual users."

In contrast, leading international e-commerce sites such as Amazon typically allow registration with just an email address, adopting a more open and user-friendly approach.

"For overseas consumers without a Korea-registered mobile phone in their own name, signing up for domestic e-commerce platforms is virtually impossible," the report wrote. "Introducing more open and accessible user authentication methods should be prioritized."

Korea's slow progress in cross-border e-commerce stands in stark contrast to the rapid growth seen in other markets — especially given the country's reputation for digital innovation.

According to data from VisaNet, of all transactions made with overseas-issued payment cards in Korea between June 2023 and May 2024, 81 percent were in person. Only 19 percent occurred through non-face-to-face channels, such as e-commerce or app-based payments.

The non-face-to-face figure is notably lower than in other Asia-Pacific countries. India recorded 48 percent, while the Philippines, Taiwan and Vietnam reported 42 percent, 36 percent and 34 percent, respectively. Even Japan — often perceived as slower in adopting new technologies compared to Korea — reached 28 percent.

Tourists shop at an Olive Young store in Seoul, April 28. Reuters-Yonhap

At the heart of it is a hesitation among many Korean platforms to engage in international sales or customer service.

Industry insiders told the BOK that they fear handling chargeback disputes with overseas consumers in cases involving nondelivery or defective products, as well as the potential financial losses such disputes may entail.

Such concerns have discouraged efforts to make the payment system more inclusive.

Global payment methods like overseas-issued Visa and Mastercard, or PayPal and Alipay, are often not accepted. Only about 3 to 4 percent of domestic online merchants reported to the BOK that they accept globally branded payment cards issued overseas.

The higher merchant fees associated with those cards are also frequently cited as a deterrent.

"Korea’s domestic market remains vibrant, and changing the existing system requires significant costs and strong organizational commitment," an industry official said on condition of anonymity. "For now, meaningful shifts in the market are expected to come primarily from larger platforms."

However, the report warned that persisting with a conservative stance could leave Korea vulnerable to being overtaken by more agile foreign competitors.

If global e-commerce giants, facing revenue losses from recent geopolitical friction, seek to offset those declines by expanding sales in alternative markets like Korea, the existing imbalance of cross-border commerce could worsen.

"It is time to reassess the real benefits and opportunity costs of maintaining membership and payment systems that differ from global standards," the report wrote. "Bringing domestic e-commerce platforms in line with global standards is vital for building a sustainable growth model by securing a reliable international customer base. This should be viewed as long-term infrastructure development, not a one-off effort."

The report emphasized the government's role in enabling the private sector to make those changes. "It can help reassure the industry that a Korea-registered phone number is not legally required for user verification, and that fraud involving foreign-issued payment methods can be managed effectively through various safeguards."

To ease the burden of serving overseas customers, the government could support small e-commerce platforms by providing affordable access to integrated fulfillment services, which include logistics, returns and exchanges, according to the BOK.

Public-private partnerships aimed at expanding essential infrastructure, such as global shipping and logistics hubs, would also play a critical role. Where necessary, part of the associated costs could be offset through government funding.