Dining Research Institute "Increased Difficulties Due to Government Budget Cuts on Local Love Gift Certificates"

Government Budget Halved Again This Year
Mobile and Paper Fees Free... Card Type Cheaper
50% Fee Difference Compared to Card and Simple Payments
Win-Win Virtuous Cycle for Consumers Too

Government budget support for local love gift certificates, which have commission fees more than 50% cheaper than regular cards or simple payments and significantly reduce the burden on restaurant owners, is decreasing, raising concerns that the difficulties faced by restaurant owners are intensifying.

Local Love Gift Certificates.
Photo by Korea Minting and Security Printing Corporation

According to the Food Service Industry Research Institute on the 19th, the government support budget for local love gift certificates, which was 669.9 billion won in 2020, increased significantly to 1.2522 trillion won in 2021, then halved to 605 billion won last year, and fell again by 42% this year to 352.5 billion won.

Local love gift certificates are a type of local currency issued in 2017 with the purpose of stimulating local consumption and revitalizing the local economy by supporting small business owners. They can be used at local self-employed businesses and small business franchise stores with sales under 3 billion won, excluding large marts and department stores.

There are three main types of local love gift certificates, among which the mobile and paper types have no commission fees at all, greatly reducing the commission burden on restaurant owners. Even for the card type, only a payment commission fee ranging from 2,500 won to 15,000 won is paid to the affiliated bank, which is about 16.6% cheaper than credit cards and 51.9% cheaper than general simple payments.

When a restaurant owner generates sales of 1 million won, if paid by a regular credit card, they must pay a payment commission fee of about 5,000 to 15,000 won to the card company. In comparison, when using local love gift certificates, they pay about 15,000 to 26,000 won to the PG company, showing a significant difference. Due to these advantages, the adoption rate of local love gift certificates by local governments is rising, with 80.6% currently adopting them. This is an increase of about 11% (196 entities) compared to July 2019.

However, the problem is that despite the COVID-19 pandemic, government support budgets are decreasing. Local love gift certificates are operated by local governments, and since both national (government) and local (local government) budgets are simultaneously invested in budget allocation (burden rate) and operation, the system is practically unsustainable without government budget input. From the perspective of restaurant owners who find it difficult to survive without reducing payment commissions, active government support for local love gift certificates is urgently needed.

Choi Seung-hoon, senior researcher at the Food Service Industry Research Institute, said, "Even after the transition to the endemic phase, restaurant owners are still facing difficulties due to issues such as the Fukushima nuclear wastewater discharge. Considering the government's purpose of issuing local love gift certificates, budget support should be maintained. Local governments also need to make active efforts at the local level, such as allocating their own budgets to expand consumer incentives. From the restaurant owners' perspective, reducing payment commissions through the activation of local love gift certificates is necessary, and I hope a virtuous cycle system can be established where both restaurant owners and consumers can 'win-win'."

Lee Eun-hee, professor of Consumer Studies at Inha University, advised, "Given the current difficult economic situation, I think some financial support should be provided especially for small self-employed business owners. However, when supporting budgets, if the parts that individual restaurant operators find difficult to invest in, such as facilities or environment, are nicely improved to attract consumers and encourage consumption, it can be expected that the commercial district will develop and the region will be revitalized."

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