Lower credit card commission plan faces objections
The Financial Services Commission (FSC) is set to announce a cut in credit card transaction fees totaling as much as 1 trillion won ($875 million) by the end of this month, according to government and industry sources. Though the announcement was scheduled to be made at an earlier date, it was postponed in the face of demonstrations by unions who fiercely protested the reduction.
The government’s stance is that there is room for Korea’s eight credit card companies - KEB Hana Card, Lotte Card, Samsung Card, Shinhan Card, Woori Card, KB Kookmin Card, Hyundai Card and BC Card - to spend less on marketing and charge lower commission fees, especially to small merchants earning an annual revenue under 1 billion won. The eight card companies are estimated to spend 6 trillion won every year combined on marketing, according to the FSC.
To protest the possible cuts, a coalition of credit card company worker unions, including the Korean Federation of Clerical and Financial Labor Unions and the Korean Financial Industry Union, came together to express their grievances in front of the ruling Democratic Party’s headquarters in Yeouido on Monday.
“The government is fully aware that the proposed cuts will put a lot of pressure on the card companies,” said one manager at a card company who requested anonymity. “But it is already set on the direction it wants to pursue with the credit card commission reduction. Officials don’t even try to listen to the industry’s opinion.”
Small merchants stood their ground. On Tuesday, 20 merchant associations, including the Korea Mart Association, gathered at a park in Gwanghwamun to call for lower credit card commissions, arguing that small businesses were being charged more than large conglomerates.
The FSC revises credit card commission fees every three years. In 2015, it cut credit-card processing fees by an estimated 670 billion won. Currently, merchants with annual sales of less than 300 million won pay a 0.8 percent commission rate.
This July, in line with Moon Jae-in administration’s efforts to help small merchants cope with increased labor costs from the minimum wage hike, the government tweaked regulations concerning credit card commissions to help small merchants, such as by expanding the range of businesses that qualify for lower commissions.
“We are almost done calculating how much credit card companies will be able to reduce commission fees and will finalize the cuts by the end of this month,” said FSC Chairman Choi Jong-ku Tuesday during a press conference. “The 6 trillion won that card companies spend on marketing can be reasonably reduced.”
“It is difficult to say that credit card companies are being treated unfairly,” Choi added. “Though they may be affected short-term as they adjust marketing expenses, their profits won’t be seriously hurt after the changes.”
The Financial Supervisory Service also launched inspections this week into all eight card companies to determine whether they have been following through with an agreement they signed with the regulator in 2016 to ensure transparent operations.
BY KIM EUN-JIN [firstname.lastname@example.org]
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