An Analysis on Using ActiveX Plug-in Controls and Public Key Certificates for On-line Transactions, with Policy Implications of Plausible Regulatory Reform Strategies

A televised debate on regulatory reform strategies, presided over by South Korean President Park Geun-hye, took place in March 2014. One of the issues that drew significant attention was the effect of requiring digital signature certificates and Active-X for online transactions on cross-border e-commerce. The critics argue that the requisite digital signature certificates and Active-X make it extremely difficult for foreign customers to make purchases from Korean online stores. For foreign consumers who are accustomed to straightforward e-commerce payment systems found in the developed world that are designed to be secure but simple and user-friendly ? such as used by Amazon.com where providing an e-mail address and credit card information is enough to make online purchases ? the Korean online payment system is the sufficient(if not primary) reason to avoid Korean online sellers. In comparison to the global standard, the Korean e-commerce system is not only inefficient but also causes consumer dissatisfaction. Moreover, it is actually an effective barrier against international trade. Many critics call for deregulation of the current online payment system that requires digital signature certification and Active-X, but without offering method of ensuring online security. In light of the debate on regulatory reform of the Korean e-commerce payment system, this paper seeks to propose some possible options for replacing the current system. The paper begins by identifying the key issues in the debate. It then provides a critical evaluation of Active-X and summarizes how online transactions are carried out in other countries. The paper continues with the history of the so-called public key infrastructure(PKI) in Korea, which set the framework for the current online payment system with digital signature certification and Active-X. In the next section, the current system is analyzed within an institutional framework using the concept of path dependence. The paper closes with proposing four models for reforming the system, with the suggestion that South Korea might become the logistics hub for e-commerce trade in Far East, by acting as the distribution center for goods traded online.