Small card transactions a big worry
Published: 15 Aug. 2013, 20:56
Whenever Lee Seong-moo, a 31-year-old company worker, stops by a convenience store to buy an energy drink along with other refreshments near his office in central Seoul, he takes out his credit card.
Though the total amount of money he is asked to pay is usually only several thousand won, he prefers paying with his card because it is more convenient.
“Even when my receipt is 2,000 won, I pay with my credit card,” Lee said. “I hardly bring cash with me, and also there’s nothing wrong paying with a card at a convenience store regardless of how much I buy.”
Lee isn’t alone.
Data by the Credit Finance Association showed yesterday that the percentage of credit card transactions less than 10,000 won ($8.95) reached almost 40 percent in June.
Of the 904 million card purchases in June, 39.2 percent were for less than 10,000 won. The figure is an increase from 36 percent from a year ago and 31.9 percent in December 2011.
“More people seem to prefer paying with their credit cards even if the amount isn’t huge,” said an official from the association. “What’s of concern, though, is how such a trend affects credit card companies.”
According to industry officials, a rise in small payments is a burden for card companies because the total amount of commissions they pay to value added network (VAN) companies goes up.
Officials worry that this could reduce the profits of card companies, which have been under pressure already from the sluggish business environment and reduced revenue from transaction fees.
VAN companies provide terminals and networks between merchants and card companies.
“The commissions we pay value added network companies is between 80 won and 150 won per transaction,” said the official.
BY LEE EUN-JOO [[email protected]]
Though the total amount of money he is asked to pay is usually only several thousand won, he prefers paying with his card because it is more convenient.
“Even when my receipt is 2,000 won, I pay with my credit card,” Lee said. “I hardly bring cash with me, and also there’s nothing wrong paying with a card at a convenience store regardless of how much I buy.”
Lee isn’t alone.
Data by the Credit Finance Association showed yesterday that the percentage of credit card transactions less than 10,000 won ($8.95) reached almost 40 percent in June.
Of the 904 million card purchases in June, 39.2 percent were for less than 10,000 won. The figure is an increase from 36 percent from a year ago and 31.9 percent in December 2011.
“More people seem to prefer paying with their credit cards even if the amount isn’t huge,” said an official from the association. “What’s of concern, though, is how such a trend affects credit card companies.”
According to industry officials, a rise in small payments is a burden for card companies because the total amount of commissions they pay to value added network (VAN) companies goes up.
Officials worry that this could reduce the profits of card companies, which have been under pressure already from the sluggish business environment and reduced revenue from transaction fees.
VAN companies provide terminals and networks between merchants and card companies.
“The commissions we pay value added network companies is between 80 won and 150 won per transaction,” said the official.
BY LEE EUN-JOO [[email protected]]
with the Korea JoongAng Daily
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