Card Approval Amounts Increased for 7 Consecutive Months... Card Industry Says "Fees Are in Deficit" (Comprehensive)

Card Approval Amount Increases for 7 Consecutive Months Since February
Government Subsidies Expected to Boost 4th Quarter
Fee Revenue in Deficit... Concerns Over Card Industry's Profits Appearing Large

[Asia Economy Reporter Ki Ha-young] Despite the 4th wave of COVID-19, card approval amounts have maintained an increasing trend for seven consecutive months. Due to government subsidies such as the Win-Win National Support Fund and the Consumption Support Fund, card spending is expected to increase in the fourth quarter as well. However, the card industry seems worried that this might be perceived as generating large profits. There are concerns that this could be used as justification for lowering merchant fees ahead of the fee recalculation scheduled for November.

According to the Credit Finance Association on the 29th, the total card (credit, check, prepaid) approval amount last month was 80.7 trillion KRW, an 8.6% increase compared to the previous year. During the same period, the number of approvals also rose by 4.8% to 1.99 billion transactions compared to last year. Breaking it down by personal and corporate cards, personal card approval amounts increased by 6.6% to 66.2 trillion KRW, while corporate cards surged 19% to 14.6 trillion KRW. By industry, accommodation and food services decreased by 13% compared to the previous year, but wholesale and retail trade (11%) and educational services (17.5%) showed growth.

Since the beginning of this year, card approval amounts have increased for seven consecutive months since February. After a 1.9% contraction in January, growth rates were 8.9% in February, 20.5% in March, and 18.3% in April, marking nearly 20% growth for two consecutive months. Although the growth rate slowed to 5.4% in May, 7% in June, 6% in July, and 8.6% in August, the monthly approval amount remained above 80 trillion KRW, maintaining the upward trend. This is analyzed as pent-up consumption being released and consumers adapting to the prolonged COVID-19 situation. Notably, even as the number of confirmed cases exceeded 2,000 from July, entering the 4th wave of COVID-19, consumer sentiment did not significantly decline.

Card Spending Expected to Increase in Q4... Card Companies Worry About Misunderstanding of Large Profits

From this month, the increase in card approval amounts is expected to accelerate further due to various government subsidies. Following the Win-Win National Support Fund, which was paid to 88% of the entire population, the Win-Win Consumption Support Fund, a card cashback system, will be implemented from the 1st of next month, likely boosting card spending. The Consumer Confidence Index (CCSI) also rebounded in September after three months. According to the Bank of Korea, the CCSI in September was 103.8, 1.3 points higher than in August.

However, the card industry is concerned that the increase in card approval amounts might be perceived as generating large profits. They worry this could lead to misunderstandings that card companies are profiting from government subsidies while their fee income remains in deficit. Especially with the fee rate recalculation scheduled for November, they are anxious that politicians might use this as a basis to lower fees to support small business owners and self-employed individuals facing financial difficulties.

The Card Company Labor Union Council also held a press conference yesterday regarding the reduction of card fees, stating, "Questions and answers are expected at this year's National Assembly audit," and expressing concerns that "there might be calls to lower fees proportionally to the profits made from disaster relief funds and demands for fund contributions." They added, "At 96% of merchants who receive preferential fee rates, losses accumulate as sales occur," and argued, "The qualified cost recalculation system, which only benefits big tech companies, should be abolished."

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