Shinhan breaks logjamShinhan Card announced yesterday that it will resume offering interest-free installment-based payments at specific outlets starting in March.
The announcement comes 11 days after the option was discontinued, at great inconvenience to customers, when card firms and retailers failed to narrow their differences on how to split the expenses of the service. But Shinhan Card has now managed to hammer out deals with Homeplus, Auction, G-Market, Lotte.com, GS Super and Lotte Duty Free. It is the first credit card firm in the country to reach a deal with retailers to split the cost of the interest payments evenly.
A revised law that went into effect this year bans credit card firms from covering over 50 percent of marketing costs for deals like the installment option with retailers who have 100 billion won ($91.9 million) or more in annual revenue.
Up until last year, credit card companies covered most of the interest payments. Last year alone, they spent 1.2 trillion won on installment interest, which accounts for 24 percent of overall marketing expenses. Retailers had protested the revisions to the law, but some seem to have resigned themselves to the new reality after seeing sales drop following the limitations placed on payment options.
“The resumption of the interest-free installment-based payment service is significant given that a card firm and retailers eventually found a middle ground that’s win-win for both sides after undergoing a series of negotiations,” said an employee at Shinhan Card. “The resumption of the service is aimed at minimizing the burden on customers inconvenienced by limited payment options and at stabilizing life in ordinary households.”
Shinhan said it will continue negotiations with other big retailers who have not yet jumped on the bandwagon. Other credit card firms and retailers are likely to follow suit now that Shinhan, the No. 1 player in the market, is back in the game.
Hana SK Card has already joined the fray, announcing yesterday afternoon that it will resume offering the interest-free installments at an online shop run by SK Group called 11st, Korean consumer electronics company Winia Mando, water purifier manufacturer Chungho Nais, and educational publisher Daekyo.
“If market leader Shinhan successfully resumes the interest-free installment-based payments with more retailers, it will help credit card firms reach a compromise with retailers as well,” said an employee at a credit card firm.
By Kim Mi-ju [email@example.com]