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NAVER Pay’s “fast settlement” system garnered much attention with the recent controversy over the payment settlement method of e-commerce platforms. Launched in November 2020, this policy pays out the entire settlement amount to businesses for free the day after they start delivery, standing at the forefront of resolving the challenges of small businesses in securing funds.

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From 60 days to 3 days — how NAVER Pay’s fast settlement transformed the e-commerce ecosystem

Even before the quick settlement service was introduced, NAVER’s Smart Store sellers got their settlements in roughly eight days, which is one business day after consumers confirm their purchases. This was much faster than other e-commerce players at home and abroad, which usually took up to 60 days. The company was hailed for its groundbreaking settlement cycle and was selected as an “excellent institution promoting mutually beneficial cooperation” by the Financial Supervisory Service.

It is key for SMEs to have money in circulation to maintain and expand their businesses. However, the current settlement period of many e-commerce companies is at least 10 days up to 60 days after payment, putting small businesses under a huge burden since they may have difficulty securing not only their inventories to sell before their revenue is converted into cash, but also funds necessary for business operation, such as purchasing, labor, and rental costs.

Consumers may also fall victim to the increasing burden of merchants. They would not be able to buy their desired products when necessary if a seller is running out of spare money, failing to reserve its inventory, and struggling to stay afloat. Aiming to help sellers improve their cash flow and eventually promote a safe e-commerce ecosystem, NAVER Pay announced the fast settlement service, which pays out 100% of the settlement amount the day after the start of delivery so that the average settlement cycle is shortened to three days.

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As of the end of July 2024, the amount of settlement paid to sellers through the fast settlement service exceeded the cumulative KRW 40 trillion. Businesses that find their cash flow temporarily blocked due to delayed settlement of e-commerce platforms normally turn to banks for pre-settlement loans. Assuming that its annual average interest rate is 4.5%, the fast settlement service can save approximately KRW 180 billion in interest costs. Starting from 2023, order-type merchants, which refer to external shopping malls that use NAVER Pay, have also joined forces with NAVER Smart Store sellers to adopt rapid settlement, and approximately 120 thousand business owners are currently taking advantage of this service.

*Pre-settlement loans : A financial product that allows e-commerce platform sellers to get bank loans using accounts receivable that prove their pre-settlement sales as collateral, and automatically repays the settlement amount through payment gateways on the settlement day designated by the platform

**The cumulative number of businesses that have experienced fast settlement as of July 2024

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NAVER’s strong in-house technological prowess behind fast settlement

NAVER’s rapid settlement is getting more robust with the FDS* system that detects fraudulent transactions. While there are alternatives available for purchase in the market, NAVER Pay has been developing its own FDS early on to provide more stable payment and financial services.

NAVER’s FDS is equipped with machine learning and big data processing technology to collect and identify the pattern of numerous transaction data within NAVER Pay. This helps streamline the eligibility conditions of the fast settlement service to ensure the smooth operation of more businesses, and quickly detect fraudulent transactions or other abuses* to create a convenient and safe service.

*FDS (Fraud Detection System) : A system that takes into account users’ payment behaviors based on their NAVER Pay payment information to tackle payment fraud attempts where the payment is not made by the user or suspected to be a third-party fraud

* Abusing : Acts of gaining unfair profits by abusing a specific target

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“I am confident that our competitiveness comes from our own technology that we developed one after another from scratch and our capability to detect abusive acts by connecting countless data. We are always ready to provide strong support for good services like the fast settlement service whenever they are released.”

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A reliable financial supporter providing hands-on support when most needed

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NAVER Pay believes that a safe purchasing environment for consumers can only be created when businesses continue to increase their revenue, which in turn, lays the foundation for a healthy ecosystem for everyone to grow together.

This belief has motivated the company to hold hands with businesses to address their big and small concerns. Apart from the fast settlement service, NAVER has been executing Project Flower, Compulsory Insurance for Business Owners that shows all the must-know information on compulsory insurance for businesses, Return Relief Care which offers free return services to help sellers increase their revenue, and My Biz for businesses to check government support programs and financial services at a glance and apply for them.

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“I think creating services that give hands-on support to businesses is the way for us to grow together. This is why our goal for co-prosperity is not merely a hollow word. We really think hard of what challenges we should address for SMEs to continuously increase their revenue and stably run their businesses”

NAVER Pay will continue to provide real-life support for businesses and promote a healthy financial ecosystem ●​