Card companies scramble to handle $9.5 bil. consumption vouchers

A man makes a payment using Samsung Pay at a convenience store in Seoul, June 2. Yonhap

Card companies are launching full-scale development of their IT systems ahead of the release of 13 trillion won ($9.5 billion) in prepaid vouchers, industry officials said Tuesday.

However, the industry remains relatively subdued, as the program's low profitability dampens enthusiasm despite its potential to bring in customers.

The government will begin distributing prepaid vouchers, aimed at stimulating economic recovery, starting July 21. The total budget allocated is 13.8 trillion won. Recipients can choose to receive them in the form of credit or debit cards, prepaid cards or local government-issued gift certificates.

About 10 trillion won is expected to be issued via credit and debit cards. During the emergency relief distribution in 2020 — a similar program aimed at boosting the economy during COVID-19 — 70 percent of the funds were provided through debit and credit cards.

Card companies have been increasing server capacity and running security tests over the past two weeks to avoid the website disruptions and instability experienced during the 2020 rollout. They are also setting up guidance systems to help users identify eligible merchants and preparing customer support channels.

The card industry appears to view the scheme positively, as it continues to struggle amid sluggish consumer spending. Last year, card companies recorded a delinquency rate of 1.65 percent, the highest level in a decade. The policy may offer a chance to attract new customers and re-engage dormant ones.

A sign indicating that local vouchers are accepted is displayed in front of a shop at a traditional market in Seoul, Sunday. Yonhap

Still, aggressive marketing campaigns by card companies are unlikely this time.

Those who opt for credit or debit cards or prepaid cards will only be able to use the vouchers at small businesses with annual sales of 3 billion won or less. Usage will be restricted at large retailers such as hypermarkets, department stores, duty-free shops and online shopping platforms.

The small and mid-sized merchants offer lower transaction fees, so the program provides limited profitability once infrastructure and system setup costs are factored in. No significant government support is being offered to cover the costs of building up the necessary systems.

Adding to the caution is the precedent set in 2020, when financial authorities issued a warning to card companies to refrain from excessive marketing.

At the time, card issuers had launched promotions such as coffee coupon giveaways and cashback events to attract emergency relief fund users. Regulators issued a caution against using public funds as a marketing tool, and many planned campaigns were subsequently canceled.

"We are working hard not for profit, but out of a sense of duty, as this is a national initiative," a card industry official said.

Meanwhile, applications for the first round open July 21, with citizens receiving 150,000 to 450,000 won per person based on income. A second round begins September 22, offering an extra 100,000 won to the bottom 90 percent.

Eligible foreign nationals include those on resident records with at least one Korean citizen and enrolled in national health insurance. Entirely foreign households may also qualify if they include F-5 permanent residents or F-6 marriage migrants who meet insurance criteria.