Card Companies Swiftly Respond to COVID Disaster Basic Income Payments

Using Card Infrastructure Simplifies Payments
Card Companies Also Expect Increased Transaction Volume

[Asia Economy Reporter Ki Ha-young] As the government and local governments have concretized the payment of disaster relief funds due to the impact of the novel coronavirus infection (COVID-19), credit card companies have jumped into the competition to attract customers. Utilizing the infrastructure of credit card companies makes it easier to distribute disaster relief funds, and from the card companies' perspective, it can increase card payment amounts.

According to the industry on the 17th, Shinhan Card offers a cashback benefit of 5,000 to 10,000 KRW when customers who applied for Gyeonggi-do Disaster Basic Income with their credit card spend more than 10,000 KRW at affiliated stores, limited to those who received related text messages until the 30th. Samsung Card also provides a cashback benefit of 5,000 to 10,000 KRW to customers who applied for Gyeonggi-do Disaster Basic Income but have not used their cards recently. Woori Card offers a Starbucks Americano mobile coupon to 1,000 customers selected by lottery among those who completed the application for using Gyeonggi-do Disaster Basic Income with their credit card.

The reason credit card companies have started marketing battles over the Disaster Basic Income is that card payment amounts sharply decreased as consumption froze due to COVID-19. Since customers using disaster relief funds with credit cards can increase card payment amounts, it serves as an opportunity to attract customers.

In fact, the total personal credit card approval amount of the eight major card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana, BC Card) last month was 40.7466 trillion KRW, down 4.1% compared to the previous year. Considering that personal card usage amounts have grown by about 5-6% annually on average, this is nearly a 10% decrease. Additionally, through the use of disaster relief funds, card companies can induce the activation of dormant customers.

An industry official said, "Gyeonggi-do Disaster Basic Income can only be used at businesses with annual sales under 1 billion KRW, so the merchant fee is around 1%. Usually, the fee needs to be about 1.5-1.6% for card companies to maintain revenue, so card companies' participation in the Disaster Basic Income payment is providing their infrastructure to overcome the national disaster situation caused by COVID-19."

Meanwhile, the government has prepared an additional supplementary budget of about 7.6 trillion KRW to provide up to 1 million KRW (based on a household of four or more) to the bottom 70% income group. Using existing cards when distributing disaster relief funds can reduce the cost and time of issuing prepaid cards. Also, utilizing the card companies' merchant infrastructure makes it easier to use disaster relief funds.

Earlier, as Gyeonggi-do expanded the payment methods of Disaster Basic Income to include not only local currency and prepaid cards but also credit cards, card companies have also participated in the payment. Gyeonggi-do currently provides 100,000 KRW per person to all residents of Gyeonggi-do. The usable credit cards include a total of 13 types such as Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, and Hana Cards. Interest is so high that within a week of payment, 4.7 million applicants out of 13.27 million Gyeonggi-do residents have applied.

This content was produced with the assistance of AI translation services.