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| Financial Services Commission Chairman Choi Jong-ku, second from left, speaks at a meeting with chief executives of credit card firms in Seoul, Tuesday. Yonhap |
By Park Hyong-ki
The country's financial regulator will ease rules enabling local credit card companies to diversify their operations so that they can not only develop new digital business models but also rely less on transaction fees for growth.
In a meeting with the heads of the card firms in Seoul, Tuesday, Financial Services Commission (FSC) Chairman Choi Jong-ku said the regulator appreciated the companies for following its low fee rate policy for small businesses early this year.
He added he also understood their troubles in maintaining profitability amid the fee reduction, and negotiating with large merchants, urging both sides to reach a "reasonable" agreement over fees.
"However, if the card companies continue to count on big marketing spending to attract new users and merchants' transaction fees, they will inevitably face a steep downfall in the digital age," and Choi.
He urged them to "experiment and test" their ideas and develop them into new businesses.
So after listening to the companies for the past five months since the regulator introduced the reduced fee rates, the FSC will allow them to freely use their customer data and analyze them so that they can provide big data analysis services and consulting as a new business.
It will allow them to as long as they abide by rules governing consumer protection, the FSC added.
For instance, the companies will not face strict restrictions when they seek to finance their new data business with debts.
Rules forbid them to use debts to finance more than 83 percent of their assets. The industry's average stood at 79 percent as of the end of 2018.
The industry has welcomed the lowered barrier to launch data services given all seek to jump into the field.
"Without the use of big data, one cannot move toward the next phase in using artificial intelligence," said a card industry source.
The FSC will also allow the card companies to provide business-to-business (B2B) equipment rental services.
They will not be allowed to provide direct-to-consumer rental services as they could hurt small businesses in the area.
The regulator will only let them compete in B2B rental as they are only a few players including AJ Networks.
The chairman stressed the regulator will no longer tolerate seeing the card firms spending excessively as part of marketing especially to maintain their relations with big merchants.
It will revise relevant laws to forbid "unreasonable expenses" and enforce the companies to strengthen their internal systems to better calculate and forecast their spending.
Workers of six card companies sought to protest against the regulator this week over their dissatisfaction toward the FSC's enforced fee reduction, which they have said will only lead to conflict and restructuring.
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