[Card Fee Reform] Annual Sales Under 300 Million Won Merchant Fee Rate Reduced by 0.3%p

Financial Services Commission Announces Card Fee Reform Plan
Fee Reduction Applies to 96% of Merchants, Worth Approximately 470 Billion KRW
Implementation from End of Next Month Following Legislative Notice and FSC Approval

[Asia Economy Reporter Jin-ho Kim] The Democratic Party of Korea and financial authorities will reduce credit card fees for merchants with annual sales of 300 million KRW or less from the current 0.8% to 0.5%, a decrease of 0.3 percentage points. This measure aims to ease the burden on self-employed individuals and small business owners amid the prolonged COVID-19 situation.

On the 23rd, the Financial Services Commission announced the 'Card Fee Reform Plan' centered on this content. Earlier that day, the ruling party and government had discussed the card fee reform plan during a morning meeting.

This card fee reform plan is intended to reduce the card fee burden on small merchants and to promote institutional improvements for a sustainable fee system in the future.

First, based on the calculation of eligible costs, the amount of fee burden reduction due to this reform is estimated at 470 billion KRW. The financial authorities cited factors contributing to the fee rate decrease, including ▲reduced funding costs due to interest rate cuts ▲decreased labor costs due to the expansion of non-face-to-face business ▲reduced VAN fee costs due to increased online payment proportions.

Based on the eligible cost calculation results, the Financial Services Commission adjusted preferential fee rates so that small merchants can benefit more from the fee burden reduction. For small merchants with annual sales of 300 million KRW or less, the fee rate is lowered by 0.3 percentage points from 0.8% to 0.5%. The fee rates for small and medium merchants are also adjusted downward by annual sales brackets: 300 million to 500 million KRW from 1.3% to 1.1%, 500 million to 1 billion KRW from 1.4% to 1.25%, and 1 billion to 3 billion KRW from 1.6% to 1.5%.

For check cards, small merchants with annual sales of 300 million KRW or less will see a 0.25 percentage point reduction from 0.5% to 0.25%. The fee rates for small and medium merchants are also lowered by annual sales brackets: 300 million to 500 million KRW from 1% to 0.85%, 500 million to 1 billion KRW from 1.1% to 1.0%, and 1 billion to 3 billion KRW from 1.3% to 1.25%.

Approximately 60% of the adjusted amount (470 billion KRW) will be allocated to small merchants with annual sales of 300 million KRW or less, about 30% to small and medium merchants with annual sales between 300 million and 1 billion KRW, and about 10% to small and medium merchants with annual sales between 1 billion and 3 billion KRW.

Through this fee reform, it is expected that the fee burden will be reduced by more than 40% for approximately 2.2 million small merchants with annual sales of 300 million KRW or less, accounting for 75% of all merchants. The financial authorities explained that small merchants and self-employed individuals will enjoy fee burden reduction benefits evenly across all sales brackets.

For example, a small self-employed person with annual sales of 300 million KRW or less, having credit card sales of 150 million KRW and check card sales of 50 million KRW (total card sales of 200 million KRW), will be able to reduce annual fees by approximately 575,000 KRW due to this fee reform.

Additionally, the Financial Services Commission plans to form a task force (TF) for institutional improvements centered on consumers, merchants, and the card industry to seek cooperative measures for mutual growth among stakeholders. They will re-examine whether the eligible cost-based fee system appropriately reflects the operating costs and profits and losses of the credit sales sector, and will prevent excessive reductions in consumer benefits to maintain competitiveness in the credit sales sector. They will also consider institutional improvements such as adjusting the next recalculation cycle.

Various incentives will be provided to the industry bearing the burden of the card fee reduction. The scope of card companies' concurrent and ancillary businesses will be reasonably expanded, and the institutional foundation for effectively utilizing and distributing card company data will be strengthened. Furthermore, infrastructure competitiveness, fintech investment support, and digital innovation will be actively supported.

Meanwhile, this card fee reform plan will be implemented after the revision of the Credit Finance Business Supervision Regulations is announced for public comment and approved by the Financial Services Commission by the end of next month.

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