For those of you who are interested in starting up a business in South Korea as a foreign investor, this article takes you through a high-level opinion about some of the difficulties involved with foreign investors gaining access to corporate credit cards. The author walks through some of the historical reasons why credit cards suffered some setbacks in South Korea, including a reversal of fortune after a recession and data theft, and how that has led to regulatory nuances preventing easy access and log wait times for the ability to utilize corporate cards local currency.
The credit card crisis occurred in 2003 when many credit card issuers went bankrupt. To quickly escape from the economic disaster after the 1998 Asian financial crisis, the Korean government encouraged people to use their credit cards to borrow and spend. During 1999-2002 the number of credit cards tripled from 39 million to 105 million while the volume of total credit card transactions expanded more than six times. This policy could not last long unless there was increased expansion and productivity, thus the massive credit card lending boom was followed by a miserable bust………The scary theft of card information became known to the public in early 2014. Consumer data such as card numbers, expiration dates, email addresses and salaries of the card holders were stolen. Fortunately, however, the PIN numbers and card-verification codes were not included in the stolen data. The managers of two marketing companies were charged with buying the stolen records. The heads of three big Korean credit card firms apologized and resigned. The government set up a taskforce to overhaul the data protection rules and to toughen penalties.
The author is an advocate of loosening up the overly-regulated corporate card acess for foreign investors, certainly for one major reason around the value of direct investment in South Korea’s economy. He indicates that the restrictions are easing a bit, although the nuanced processes still seem a a bit daunting. This is a reminder that one must have a good understanding of all regulatory aspects before moving into a foreign market, including those that would seem relatively easy or expected.
Overview by Steve Murphy, Director Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
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