[Exclusive] Banks Fill Zero Pay with 'Yeoljeong Pay'

3 Years, 21 Banks
Membership Fee Expenditure 4.8 Billion KRW
Commission Income Only 500 Million KRW

(Source: Yoon Chang-hyun, Member of the People Power Party)

[Asia Economy Reporters Kwangho Lee and Chae-eun Koo] The 'Zero Pay' initiative, one of the key projects of the late Park Won-soon, former Mayor of Seoul, has been found to be maintained at a loss by banks. Despite the poor performance of Zero Pay, which falls far short of expectations, annual budgets continue to be allocated, leading to ongoing criticism of wasteful government spending. Calls are growing for the next Seoul mayor to conduct a comprehensive review of the project and devise concrete measures to enhance its effectiveness.

According to the 'Status of Zero Pay Financial Institution Membership Fees and Commission Income from December 2018 to February 2021' submitted to Yoon Chang-hyun, a member of the National Assembly's Political Affairs Committee from the People Power Party, by the Korea Financial Telecommunications and Clearings Institute, the 21 banks spent a total of 4.778 billion KRW on membership fees during this period, while commission income from merchants amounted to only 539.28 million KRW.

By bank, NH Nonghyup Bank spent 587.36 million KRW but earned only 28.5 million KRW (4.85%) in merchant commission income. Hana Bank spent 298.53 million KRW but income was just 3.85 million KRW (1.28%). SC First Bank spent 102.64 million KRW with income of 7.84287 million KRW. KDB Industrial Bank (expenditure 98.07 million KRW, income 1.93776 million KRW), Gwangju Bank (67.77 million KRW, 1.99473 million KRW), and the National Credit Union Federation of Korea (67.46 million KRW, 3.49372 million KRW) also showed very low income relative to expenditure. Notably, Jeju Bank spent 58.23 million KRW but earned only 325 KRW in income.

The minimal income from Zero Pay for banks is due to the system setting very low commission fees in line with its purpose of reducing the fee burden on small business owners. In fact, Zero Pay charges no commission for small businesses with annual sales under 800 million KRW. For sales between 800 million and 1.2 billion KRW, the fee is 0.3%, and for sales exceeding 1.2 billion KRW, it is 0.5%. General merchants not meeting these conditions must pay a 1.2% commission.

The problem is that although Zero Pay is turning into a populist policy tool, banks are reluctantly supporting it under pressure from financial authorities. A representative from a commercial bank said, "When you offset commissions and costs for Zero Pay transactions, the structure results in losses," adding, "It is an open secret that banks have joined the project reluctantly due to pressure from financial regulators."

Experts point out the need for a full review of the project. Professor Sung Tae-yoon of Yonsei University's Department of Economics said, "Zero Pay's sustainability is difficult to guarantee as it relies on fiscal input and financial institutions bearing the burden of card fees for small business owners." Professor Kim Sang-bong of Hansung University's Department of Economics stated, "Zero Pay lacks consumer and small business owner support and does not offer significant tax benefits," "The government should either terminate the project, which sustains a non-self-sufficient platform with tax money, or quickly transfer it to the private sector." Yoon Chang-hyun of the People Power Party emphasized, "Zero Pay, which the government and Seoul City boast about, needs to be reexamined to ensure it is sustainable without financial institution losses and tax support."

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