Ruling Party and Government: "Card Fees for Small Franchisees Reduced to 0.5%... 96% of Franchisees Benefit from the Reduction"

Financial Services Commission Chairman Ko Seung-beom (right) and Kim Byung-wook, Secretary of the National Assembly's Political Affairs Committee, are attending a party-government consultation on card fee reform held at the National Assembly on the 23rd, talking before the meeting begins. Photo by Yoon Dong-joo doso7@

원본보기 아이콘

[Asia Economy reporters Naju-seok and Jeon Jin-young] The ruling party and the government have agreed to lower the card fee rate from 0.8% to 0.5%, a 0.3 percentage point reduction, for small franchisees with annual sales of 300 million KRW or less. This measure aims to reduce the burden on small business owners amid COVID-19. The card industry has protested, saying that "card fees are being politically exploited." Critics argue that the political sector, viewing "support for small business owners affected by COVID-19" as a key issue ahead of the presidential election, is shifting responsibility in this context.

On the morning of the 23rd, Kim Byung-wook, a member of the National Assembly’s Political Affairs Committee from the Democratic Party of Korea, and Ko Seung-beom, Chairman of the Financial Services Commission, announced a plan to reform card merchant fees at the National Assembly Members’ Office Building. In a briefing, Representative Kim said, "We have prepared a plan to reduce about 470 billion KRW in (card) fees." According to the plan, card fees will be reduced from 1.3% to 1.1% for annual sales between 300 million and 500 million KRW, from 1.4% to 1.25% for sales between 500 million and 1 billion KRW, and from 1.6% to 1.5% for sales between 1 billion and 3 billion KRW. This means that 96% of all card merchants will be subject to the fee reduction.

The ruling party and government also announced plans to improve the qualified cost system to ease the burden on card companies. Representative Kim explained, "The Financial Services Commission will lead the formation of a task force for institutional improvements focused on win-win cooperation among consumers, merchants, and the card industry," adding, "There was unanimous agreement on the need for a comprehensive review of whether the qualified cost-based fee system appropriately reflects operational costs and profits in credit sales, and whether the recalculation cycle needs adjustment." Through this, they aim to find a way for card companies to secure competitiveness in credit sales without reducing consumer benefits.

The government amended the Specialized Credit Finance Business Act in 2012 to analyze the qualified costs of card merchant fees every three years and reduce fees accordingly. Currently, preferred merchants with sales under 3 billion KRW pay fees ranging from 0.8% to 1.6% (0.5% to 1.3% for check cards) depending on sales size, while merchants with sales exceeding 3 billion KRW pay an average fee of 1.90% to 1.95% or negotiated fees.

The card industry expressed reluctance to further fee reductions, citing operational difficulties. Jung Jong-woo, chairman of the Card Company Labor Union Council, pointed out, "For small business owners, card fees are effectively refunded when considering reimbursements," and criticized, "The difficulties faced by small business owners are not due to card fees, but card fees are being politically exploited as a tool for elections under the pretext of protecting them."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.