Card Fees Lowered Again... Card Union Warns of Total Strike Over "Failed Policy"

Reduce card fees from 0.5% to 0.4%
"Operating profit hit by 30 to 50 billion won"
Criticism that policy contradicts market logic

As the card fee rate for small business owners has been lowered once again, the Card Company Labor Union Council (Canohyup), consisting of seven card companies (Shinhan, KB Kookmin, Hyundai, Lotte, Woori, Hana, and BC Card), has declared a tough response. Experts also expressed concerns that the burden on card companies could sharply increase due to the reduction in card fees, potentially leading to a contraction in private consumption.

According to the financial sector on the 17th, the National Office Financial Services Labor Union Canohyup is expected to hold an emergency press conference as early as the 19th to announce its position on card merchant fee rates and qualified costs. It is understood that they are also considering large-scale protests and general strikes to urge the suspension of card fee reductions and the abolition of the qualified cost recalculation system. Qualified costs refer to the cost concept of merchant payments, and financial authorities have been calculating card fee rates every three years based on this.

Jung Jong-woo, chairman of Canohyup (vice chairman of the Financial Office Labor Union), emphasized in a phone interview with Asia Economy, “The financial authorities made a political decision despite knowing that the preferential fee rates for small and medium-sized merchants are already quite low,” adding, “We will actively express the card industry's opinions through press conferences and general strikes going forward.”

Previously, Canohyup held a rally in front of the Seoul Government Complex in Jongno-gu, Seoul, in September, stating, “If the desperate feelings of card workers who resolved to strike are mocked, we will launch a general strike that will be recorded in history.” During the 2021 card fee restructuring process, the Office Financial Union and the National Financial Industry Union also held a ‘Card Company Workers’ General Strike Resolution Rally.’

On the same day, the Financial Services Commission decided at the ‘Card Company CEO Meeting’ to lower the card fee for merchants with annual sales of 300 million won or less from the existing 0.5% to 0.4%, a reduction of 0.1 percentage points. The preferential fee rate for small business owners was around 1.5?2.12% when the qualified cost system was introduced in 2012, but with fee reductions every three years, the fee rate for small and medium-sized merchants has dropped to between 0.4% and 1.45%.

Officials from the Card Company Labor Union Council held a "Card Workers' General Strike Resolution Rally" in front of the main gate of the Government Seoul Office in Jongno-gu, Seoul, in 2021, urging the suspension of the reduction of card merchant fees and the abolition of the qualified cost recalculation system. Photo by Kim Hyun-min

The card industry's opposition to the recalculation of qualified costs stems from the judgment that there is no more room for further fee reductions. Due to the fee reductions every three years, card companies have been compensating for profits by expanding loans or cutting marketing costs instead of their core business of credit sales. A senior executive of a card company hinted, “When estimating next year’s business plan, it was found that a fee rate reduction would negatively impact operating profit by about 30 to 50 billion won,” adding, “Larger card companies than ours will see even greater profit declines.”

Another card industry official expressed regret, saying, “It is unfortunate that card fees were reduced again this year,” and added, “Card companies trying to minimize costs may choose to eliminate some credit card benefits. Ultimately, this will result in harm to consumers.”

Experts also unanimously called it a “wrong policy that does not align with market logic.” Professor Kang Sung-jin of Korea University’s Department of Economics criticized, “Will the government compensate for the increased burden on card companies due to fee reductions? The government appears to want credit without taking responsibility.”

Professor Seo Ji-yong of Sangmyung University’s Department of Business Administration (president of the Credit Card Association) said, “Card companies will likely pursue cost efficiency measures such as shortening the interest-free installment period due to the increased performance burden caused by fee reductions.”

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