By Na Jeong-ju
Staff Reporter
Credit card firms are coming under pressure to slash fees they charge merchants after President Roh Moo-hyun Wednesday ordered his government to take necessary measures to lower them.
During his visit to a traditional marketplace in Cheongju, North Chungcheong Province, Roh talked with merchants about the recent dispute between small businesses and card firms over processing fees.
The merchants demanded the government play a role in mediating the dispute and make efforts to reduce card fees. Roh accepted this and instructed the Ministry of Finance and Economy and the Financial Supervisory Commission to discuss ways of lowering the fees, according to Cheong Wa Dae.
Roh called for a ``political solution'' to the matter, saying the dispute cannot be settled through the logic of economics.
Roh's remarks came amid rising tension between household businesses and card firms over service fees ahead of a public hearing scheduled for July 13.
Associations of small-sized retailers criticize card firms for charging too high fees, while the firms insist that the current commission rates are lower than the global average.
Korean merchants have to pay an average 2.3 percent of the sales price in card processing fees. The rate is lower than Japan's 3 percent, and a bit higher than the United States' 2.19 percent. Given that U.S. card firms demand additional charges for other services, U.S. retailers pay more fees than Korean retailers, according to the Credit Finance Association (CFA), a lobby group for card issuers.
``Roh's remarks are a critical blow to card firms,'' said Yim Yoo, the executive director of the CFA. ``However, we will make every effort to represent the interests of our member firms during the planned hearing. We have a lot of data that supports our claim.''
The minor opposition Democratic Labor Party (DLP) argued card firms have enjoyed growing profits, but have paid little attention to the worsening financial situation for mom-and-pop businesses.
``Card firms charge lower service fees on large retail chains than small-income businesses,'' said DLP Lawmaker Roh Hoe-chan. ``Card firms say this is because of economies of scale, but it is really absurd that smaller businesses are paying higher service fees than large businesses, which make a lot more money.''
Last year, card firms posted a combined 2 trillion won in net profit. Market leader LG Card saw more than 1 trillion won in net income.
The firms argue the proportion of the service fee income in their profits is not large, and they spend billions of won annually in operating the payment system. They say most of their profits come from card-related loans and other key businesses, into which they have invested heavily.