OO Pay limit set at 5 million won... Card companies anxious about losing customers

Industry Concerns Over Check Card Impact as Recharge Limit Set at 3 to 5 Million Won

[Asia Economy Reporter Ki Ha-young] Starting as early as the end of this year, the usage limits for registered prepaid electronic payment methods such as Naver Pay and Toss will be expanded, causing the card industry to become highly alert. From the consumer's perspective, this means a wider choice of payment methods, but for the card industry, there is a risk of losing customers to fintech companies.

According to the industry on the 15th, the Financial Services Commission held the 3rd Regulatory Verification Committee on the 12th and reviewed 142 regulations under the Electronic Financial Transactions Act and the Credit Information Act, deciding to improve 26 of them. Accordingly, the current prepaid electronic payment charging limit of 2 million KRW will be increased to 3 to 5 million KRW. This will enable high-value purchases such as airline tickets and electronic goods, as well as university tuition payments, through simple payment services like Toss, Naver Pay, and Kakao Pay.

Although this decision aims to enhance convenience for electronic financial transaction users, the card industry expects that the increased limit will impact check cards. There is concern that rapidly growing simple payment providers may take away existing customers. According to the Bank of Korea's '2019 Payment Trends,' the average daily usage amount of check cards last year reached 530 billion KRW, accounting for 21.3% of total card usage. Although the share is lower than credit cards, it is an important market for card companies as many users are financial newcomers such as young adults and university students.

With the expansion of non-face-to-face payments, the use of simple payment services is also rapidly increasing. According to the Bank of Korea's survey, at the end of last year, the average daily usage of card-based simple payment services was 6.02 million transactions and 174.5 billion KRW, up 56.6% and 44.0% respectively from the previous year. This year, due to the impact of the novel coronavirus (COVID-19), the payment amount through simple payments has increased even more. In the first quarter, Naver Pay's payment amount reached 5.8 trillion KRW, nearly doubling in two years.

The card industry is also concerned that fintech companies might attract members through aggressive marketing that card companies cannot undertake. Since they are not subject to the Specialized Credit Finance Business Act (SCFBA), they have more freedom in marketing compared to card companies. For example, during the distribution of disaster relief funds, while card companies were ordered to restrain marketing, Toss held an event giving 100,000 KRW in cash to customers who newly issued a specific card.

They are also closely monitoring the possibility of allowing postpaid payment limits to simple payment providers in the future. The Financial Services Commission is preparing amendments to the Electronic Financial Business Act to permit postpaid payments for electronic financial operators (simple payment providers). Postpaid payments are currently only available to companies with at least 20 billion KRW in equity capital, but the plan is to open this to fintech companies as well. In this case, they would be able to provide loans like banks or card companies.

A card company official said, "If simple payment providers strengthen marketing to attract customers through various events such as additional charging points and cashback, card customers will inevitably defect," adding, "We are currently considering countermeasures for this."

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