Reflexive Benefits from Credit Card Cashback?…Card Industry "More Concerned Than Expecting"

Implementation of Second Half Year Win-Win Consumption Support Fund System
Costs Such as System Development Expected to Exceed Commission Profits from Consumption Promotion

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is announcing the economic policy direction for the second half of the year at the Government Seoul Office Building on the 28th. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Ki Ha-young] Although the government has announced the introduction of the 'Credit Card Cashback System (Win-Win Consumption Support Fund)' to stimulate consumption in the second half of the year, credit card companies are expressing more concerns than expectations. Contrary to the anticipation that they could enjoy a windfall benefit, the industry’s stance is that it is difficult to talk about real gains. As the criteria for card usage to receive actual cashback are high, there are criticisms that the effectiveness is low, and credit card companies are worried that they might suffer losses, similar to the disaster relief funds.

According to related ministries on the 29th, the Win-Win Consumption Support Fund system will be implemented as part of measures to revive domestic demand in the second half of this year. The budget allocated for the Win-Win Consumption Support Fund project in the second supplementary budget announced on the same day is expected to be about 1 trillion won.

The Win-Win Consumption Support Fund is a system that returns 10% cashback next month on the amount of card usage that exceeds the average monthly card usage in the second quarter by more than 3%. The limit is 300,000 won per person, and a maximum of 100,000 won can be refunded each month. Usage at department stores, large marts, online shopping malls, luxury specialty stores, entertainment establishments, and automobile purchases are excluded.

Within the card industry, voices of concern outweigh expectations regarding this. The concern is that the cost burden of building IT systems and other expenses may be greater than the increased commission revenue from more active card consumption due to this policy implementation.

In fact, in the case of the disaster relief funds implemented last year, contrary to expectations that card companies would profit, a loss of 8 billion won occurred. According to data submitted by the Financial Supervisory Service to Rep. Yoon Chang-hyun of the People Power Party in March, the operating revenue of seven major card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana Card) related to the government’s emergency disaster relief funds paid from May to August last year was 97.3 billion won. Operating expenses used for interest costs, sales and administrative expenses (related to point payments and billing discounts), server upgrades, and additional infrastructure construction costs amounted to 105.3 billion won. Considering both revenue and input costs, card companies suffered losses from the disaster relief funds.

An industry official said, "Although the criteria for performance aggregation and point payment methods have not yet been clearly established, the time and cost required to develop the IT system reflecting this are expected to be considerable," adding, "We will cooperate as much as possible in support of government policy, but we do not expect significant profits."

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