[Square] Financial Industry, Jobs, and Credit Card Fees

Lim Yu, former Executive Director of the Korea Financial Investment Association

The elderly mother, well over eighty, rarely gives up on going to the bank despite her aching legs. Even though she grumbles about having to walk over a kilometer since the branch at the apartment entrance disappeared. When advised to use the ATM, she firmly waves it off, seemingly due to anxiety about dealing with machines and money, so all I can do is nag her to take the bus instead of walking. The so-called 'non-face-to-face channel' activation strategy leading to bank branch reductions is casting deep shadows and sighs everywhere.

If it were only the elderly mother's hardship, declaring a branchless era instead of branch reduction wouldn't be a big deal. But the hidden employment issues behind it are too large and serious, so I cannot help but call for a reconsideration of the branch reduction strategy. Branch reduction is a survival strategy for banks prioritizing profits, but the current situation feels like watching a runaway train with no brakes. The scale of branch closures has increased every year; last year, the four major banks reduced 304 branches compared to the previous year, and this year the number is expected to be even larger. It's like wanting to cry but getting slapped by COVID-19. Instead of maintaining offline branches that cost an average of 1 billion won each, banks have started accelerating their cheap and fast mobile branch strategies.

It is not blameworthy for individual banks to pursue profits. However, if jobs are lost and disparities widen while banks chase profits, the story changes. Even if we assume 10 employees per branch, 3,000 jobs disappear every year, and the financial welfare of rural areas and the elderly is worsening, so we cannot just fold our arms and watch.

The financial authorities should learn from the 'Gwangju-type job' policy. The key to the success of the Gwangju-type job was the industry's and labor's mutual exchange of employment stability and flexibility, with the government and local governments responding with support. Instead of withdrawing branch reduction through labor-management agreements in banks, the government and financial authorities should promise extraordinary incentives beyond tax support. Providing business spaces cheaply or free of charge or granting subsidies for newly hired workers could be one way. Creating quality jobs is not far away. It only requires a reversal of thinking and determination.

The credit card industry is no exception when it comes to jobs. The number has decreased to the point that calling it a disaster is not an exaggeration. The decline started in 2009 when the credit card merchant fee system was completely restructured. When fees were lowered through the so-called 'qualified cost' framework, which is nothing but private service price control logic, credit card companies rushed to cut costs. Benefits that used to go to credit card members disappeared, and many workers involved in various value chains within the credit card industry lost their jobs. The number of card solicitors, which was over 20,000 five years ago, has dropped to below 10,000 this year. This means that over 10,000 solicitors lost their jobs to give a 100,000 won gift to a small business owner who sells 10 million won per month. Considering the reduction in VAN companies and merchant sales staff, which are part of the credit card payment network, the term 'job massacre' seems appropriate.

Since we have not heard small business owners say they increased jobs thanks to reduced fees, it is clear that fee reduction is a 'MINUS SUM' job policy. After ten years of policy implementation, there should have been at least one review of its effectiveness, but instead of reflective introspection, we are about to witness the knife dance of three-year cycle believers again. The fee system to be maintained for the next three years will be announced soon, so this is what I say.

The media is already taking additional fee cuts as a given, and credit card company unions have announced a general strike. With a fee rate below cost of 0.8% applied to the vast majority of small business owners with annual sales under 300 million won, and 96% of all merchants receiving preferential fees, I cannot understand how much more they intend to cut. We must fix the broken brakes before it is too late. We cannot just blame the inertia and insensitivity of financial bureaucrats. Now it is time for politics to provide the answer. If we truly care about small business owners, the simplistic cost-cutting measure of fee reduction must stop, and more fundamental sales policies should be pursued.

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