Credit card firms urged to manage risk betterKim Keun-soo, newly-appointed chairman of the Credit Finance Association, urged credit card companies to beef up risk management and asset stability in response to a sluggish business environment aggravated by reduced revenue from transaction fees.
“Credit card transaction fee cuts, which happened in 2012 for the first time in 35 years, have led to big drops in operating profits,” Kim said at a press conference at the Sejong Center for the Performing Arts in Gwanghwamun, central Seoul. “Coupled with the other government regulations, it is expected that the environment for card issues will worsen further. To achieve sustainable growth in difficult situations, credit card companies need to focus on making management more efficient, maintaining healthy financial stability and enhancing risk management strategies.”
Kim said he will do what he can to help companies find new growth engines that will also benefit customers.
It was Kim’s first session with journalists since the association appointed him chairman on June 5.
The Lee Myung-bak administration lowered transaction fees for SMEs last year, and in the first quarter of this year Korea’s seven independent credit card companies reported 462.2 billion won ($405 million) in net profit, down 45.2 percent year-on-year.
“We’re closely working with a task force that aims to bring down loan interest rates at non-banking institutions for ordinary households,” Kim said. “We will also change VAN fees based on the result of research we delegated to experts by August.”
VAN companies offer terminals and networks to merchants, providing credit card inquiry services and calculating settlement data for card companies. Merchants pay commissions including the fee to card companies.
VAN operators take an average of 90 to 150 won for each credit and debit card transaction.
Of the 8 trillion won merchants paid to credit card companies last year, VAN fees amounted to 700 billion won, around 8 percent.
Kim said the association will also encourage card issuers to jump into new areas such as expanding investment in new technology.
Prior to joining the association, Kim served as the secretary-general of the organizing committee for last year’s Yeosu Expo. He served various positions in the finance ministry, Korea Chamber of Commerce and Industry, the prime minister’s office and the Presidential Council on Nation Branding.
BY KIM MI-JU [firstname.lastname@example.org]