[Column] The Vicious Cycle of Card Fees Repeating Every 3 Years, It's Time to Break It Now

Officials from the Card Company Labor Union Council held a "General Strike Rally of Card Workers" on the 15th in front of the main gate of the Government Seoul Office in Jongno-gu, Seoul, urging the suspension of the reduction of card merchant fees and the abolition of the qualified cost recalculation system. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Ki Ha-young] "If we fail to abolish the eligible cost recalculation system this time, we will have to come back here again in three years."

As the announcement of the card fee revision plan, which comes every three years at the end of this month, approaches, voices are growing louder calling for improvement of the eligible cost calculation system that determines the fee rate. The Card Company Labor Union Council held a 'general strike resolution rally' and is determined to oppose further reductions in card fees and to call for the abolition of the eligible cost recalculation system, even if it means shutting down the payment network.

Card fee rates are determined by reviewing eligible costs calculated based on cost analysis. These include card companies' funding costs, risk management costs, general administrative expenses, VAN fees, and marketing expenses. The problem is that the card companies' own cost-cutting efforts result in lower fee rates. When they reduce staff and cut consumer benefits to tighten their belts, these savings are reflected in the costs, which are then calculated as room for fee reductions three years later.

Card fee rates have been reduced 13 times since 2007. According to the amendment of the Specialized Credit Finance Business Act, the fee rates have invariably decreased every time the recalculation period comes around every three years. The justification for the reductions is to protect small and micro merchants. As a result, the general merchant card fee rate, which was as high as 4.5% in 2007, has been halved to 1.97?2.04%. Domestic merchants receiving preferential fee rates of 0.8?1.6% account for 92%.

This year, the atmosphere is also leaning toward additional reductions, citing support for self-employed people whose livelihoods have been threatened by COVID-19. Because of this, even the unions opposing further fee cuts emphasize the need for system improvement, saying, "Instead of opposing the fee rate reduction three years ago, the eligible cost recalculation system should have been abolished." Experts also point out the need to revise the eligible cost recalculation system, which serves not as a reflection of the actual market price system but only as a basis for continuous fee reductions.

The financial authorities are well aware of this situation. The card industry complains that card fee revenue is in deficit due to continuous fee rate reductions. It is an ironic situation where profits are made from loan products such as card loans and automobile installment financing rather than from the core business of card fees. Now is the time to break the vicious cycle of fee reductions repeated every three years and improve the system so that card companies can sustain their core business.

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