Korea's e-Business Is Mired in the Past

An online bookstore in Korea created an electronic payment system that works through smartphones, but less than a month later, two major credit card companies refused to accept payments made through smartphones because the settlement system differed from the officially certified standard used in Korea.

The bookstore is not alone. In Korea, people cannot shop online, do Internet banking or access government or tax office sites using their smartphones. This is unheard of in the 80 countries that introduced smartphones before Korea.

The reason is the officially certified electronic payment standard used in Korea, which was introduced in 2000. The system requires customers to store a digital certificate for financial transactions in their computers, and to use the certificate they are required to download different programs that access it. Local companies developed programs that are only compatible with the notoriously buggy Microsoft Explorer, since that was the most widely used browser. As a result, ActiveX controls for Explorer ended up becoming the standard in Korea.

Now it is impossible to make any form of electronic payment or use Internet banking services in Korea without going through Explorer, because the browser is the only one authorized to confirm the identities of people making online financial transactions. But Korea is the only country in the world to use a certification program using only ActiveX functions, so while Explorer's share of the global web browser market has fallen to around 60 percent, it still controls 98 percent of the Korean market.

The problem is that ActiveX controls do not work on smartphones. Even the smartphone program that Microsoft developed does not support ActiveX. The reason is that the program increases the risk of virus infections since it involves a constant barrage of pop-up windows requiring users to click "yes" to download a wide range of mysterious programs. In short, Korea has been unable to discard a program that even its own developer has abandoned. No new portable electronic devices including the Apple iPad support ActiveX functions.

Other countries have chosen standard web technologies that can be used on both personal computers and smartphones and do not require users to download one ActiveX security program after another to make a single electronic payment. Korea is the only country to use this format, which says a lot about how backward the country's software industry is. A massive overhaul of not only Korea's electronic payment system but of its entire inconvenient Internet environment is desperately needed.