Revised Regulations Aim to Prevent Cashflow Crises for Small Business Owners
South Korea's government is taking decisive action to ensure that small sellers on e-commerce platforms don't face debilitating cashflow issues. On Wednesday, the finance ministry unveiled a new regulation that will cut the payment settlement period for e-commerce marketplaces from 60 days to 40 days. This move is designed to alleviate financial pressure on small and medium-sized enterprises (SMEs) struggling with delayed payments.
The new rules also include stricter oversight on how e-commerce platforms manage funds from incoming purchases. The government aims to prevent these platforms from delaying payments to vendors in order to improve their own liquidity. Some e-commerce giants, like Naver and G-Market, already use an escrow system to manage sales proceeds, ensuring quicker payments to vendors.
The changes come in response to a crisis involving major e-commerce players WeMakePrice and TMON, which recently faced criticism for their failure to pay vendors on time. Both companies, owned by Asian e-commerce pioneer Qoo10, halted vendor payments in early July due to a payment system glitch. As delays continued, vendors experienced severe cashflow issues, leading to protests and prompting government intervention.
In response to the payment delays, the South Korean government has established a ₩560 billion ($445 million) bailout fund. This fund will provide low-interest loans to merchants affected by the delayed payments. Additionally, local governments are contributing ₩600 billion ($435 million) in emergency stabilization funds to support vendors within their jurisdictions. An extra ₩60 billion ($43.5 million) is being allocated to aid travel agencies also affected by the delays.
With these new measures, South Korea's government is aiming to prevent similar issues in the future and provide much-needed relief to small businesses hit hard by the recent payment crises.
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