Hyundai Card CEO questions 'buy now, pay later' commission rates

Hyundai Card Vice Chairman and CEO Chung Tae-young / Courtesy of Hyundai Card

By Park Jae-hyuk

Hyundai Card Vice Chairman and CEO Chung Tae-young pointed out the excessively high commissions that merchants pay big tech firms for their provision of “buy now, pay later” (BNPL) services.

BNPL refers to a short-term financing plan that allows consumers to make purchases and pay for them at a future date ― often interest-free ― regardless of their credit score.

In Korea, Coupang has allowed its users to make deferred payments of up to 500,000 won ($420) a month, while Naver Financial has provided its users with a similar service for them to make deferred payments of up to 300,000 won a month.

Starting this year at the earliest, Kakao Pay and Viva Republica, which operates the Toss mobile money transfer app, will also offer BNPL services that have been widely viewed as “innovative.”

Chung, however, said Tuesday that the payment option is nothing new.

“BNPL is the simplest and earliest form of credit card,” he wrote on Facebook. “It developed into the current credit cards, along with the growth in the size of purchases, evaluation of credit scores and benefits given to users.”

In particular, he mentioned the high commission rates that foreign BNPL service providers enforce on their affiliated stores.

“The rates of commissions for BNPL services amount to 5 percent to 6 percent,” Chung wrote. “This is astronomical from the viewpoint of card firms that are not allowed to charge over 1 percent for their services.”

Although the commission rates of Korea's BNPL services providers are not as high as those of their overseas peers, their rates are still higher than those of credit card issuers.

In addition, the government required card firms to lower their commission rates further late last year, citing the financial difficulties that the self-employed have been suffering during the COVID-19 pandemic.