Another Cut...? Card Industry Initiates Discussions on Recalculating Merchant Fee Rates

Start of Accounting Firm Selection for Cost Analysis Consulting
Concerns Over Worsening Industry Management Due to Political Moves for Additional Price Cuts

[Asia Economy Reporter Ki Ha-young] As the card industry begins selecting an accounting firm to reassess merchant fee rates, the first step toward recalculating the fee rates has been taken. Card companies are concerned that, with small business owners' financial difficulties worsening due to COVID-19 and the upcoming presidential election next year, the political sphere and authorities might push excessively for fee rate reductions.

According to the industry on the 22nd, the Credit Finance Association sent proposals to major accounting firms on the 19th to select a consulting agency to conduct a cost analysis of card merchant fees. The Credit Finance Association plans to select the cost analysis consulting agency by early next month after reviewing proposals from accounting firms that expressed interest.

Previously, in 2018, accounting firms conducted cost analyses from May to August, and based on the results, financial authorities and the Credit Finance Association discussed reform plans for the fee system. At that time, the financial authorities finalized a reform plan in late November to reduce credit card fees by up to 0.65 percentage points and check card fees by up to 0.46 percentage points for small and medium merchants with sales between 500 million and 3 billion KRW.

As discussions to reassess merchant fees begin, voices from the political sphere demanding additional fee reductions for self-employed and small business owners struggling due to the COVID-19 impact are growing louder. Independent lawmaker Lee Yong-ho introduced a bill on the 19th to amend the Specialized Credit Finance Business Act, aiming to apply additional preferential card fee rates exclusively to small-scale merchants. The bill proposes subdividing the annual sales threshold of 300 million KRW for preferential fee rates, applying an additional preferential fee rate within 50% of the upper limit for merchants with annual sales of 100 million KRW or less, and within 30% of the upper limit for those with annual sales of 200 million KRW or less.

Earlier, Ku Ja-geun of the People Power Party proposed an amendment to the Specialized Credit Finance Business Act to fully exempt card fees on small card payments under 10,000 KRW for small and medium credit card merchants with annual sales of 3 billion KRW or less, and to apply preferential fee rates to merchants in traditional markets regardless of sales size.

The card industry is already anxious about whether merchant fee rates, which are currently at cost level, will be further reduced. Last year's strong performance, driven by lower funding costs due to the low-interest-rate environment and reduced sales and marketing expenses, could ironically serve as justification for additional fee rate cuts. The upcoming presidential election next year is also considered a negative factor increasing the likelihood of fee rate reductions.

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