 |
| Financial Services Commission (FSC) Chairman Choi Jong-ku, right, announces measures to cut credit card transaction fees with lawmakers from the ruling Democratic Party of Korea at the National Assembly, Seoul, Monday. Courtesy of FSC |
New measures unveiled to lower processing fees for self-employed
By Park Hyong-ki
The government and the ruling Democratic Party of Korea (DPK) unveiled measures Monday that will enable a larger group of the self-employed and small businesses to pay lower fees to credit card companies on customer transactions.
After the two reach a consensus, the Financial Services Commission (FSC) said it will expand the scope of reductions in card processing fees.
However, the move triggered an immediate backlash from card firms, which claimed it was a "political decision" that will pass the responsibility of the failed minimum wage hike policy onto them and customers.
Under the new plan scheduled to take effect in January 2019, small business owners with annual earnings of 500 million won ($450,000) to 1 billion won will have the fee reduced to 1.4 percent, down from 2.05 percent. Those that earn between 1 billion won and 3 billion won will be charged 1.6 percent on customers' credit card purchases, down from 2.21 percent.
Businesses with earnings of 3 billion won to 50 billion won will have to pay 1.9 percent, down from over 2 percent.
The ruling party and the regulator said the fee reduction was specifically designed to "benefit" businesses that earn less than 3 billion won annually.
These account for 93 percent of all businesses that use credit card networks.
"We tried to resolve this issue which seemed unfair to small businesses," said DPK Rep. Nam In-soon at a meeting with the FSC at the National Assembly.
The lawmaker noted a baker who earns 5 million won a year has to pay credit card fees that account for 30 percent of what they make. He urged the regulator to make sure the reduction will not affect and push the card industry to restructure.
Credit card companies are "furious and outraged," according to industry sources.
They say it was a "political decision," without regard to the industry that ended up paying costs for minimum wage hikes, which drove many of the self-employed out of business.
The measure simply tells the card companies not to make any money from the 93 percent, but only concentrate their business on large corporate customers, they added.
Big card companies could survive this, but small ones may have to consider restructuring, sources say.
"This was an ultimatum given by the regulator to the credit card companies," an industry source said.
The regulator and the ruling party claim they came up with the plan after talking with credit card issuers.
But sources say it was "not a discussion," and the reduction level announced did not reflect any concerns or suggestions from the card companies.
"There is only one solution to this fee issue. The government should just set up a state-owned credit card company and have all people and businesses use its zero-fee network," another industry source said.
The FSC suggested that all credit card companies should reduce their marketing costs as the lowered fee rates take effect.
One industry source said such a suggestion was like telling Samsung Electronics and LG Electronics to reduce their costs in promoting and advertising their washing machines and exhibiting them at events.
"The costs include marketing and promoting cards' brand partners such as theaters and gas stations to attract customers," an industry source said.
Making the industry reduce these costs would not only affect the card companies but their partners as well, the source added, questioning how the latest measure would make the market fair or competitive.
![[INTERVIEW] Disney+ 'Big Bet' director on portraying greed and desire](https://img.koreatimes.co.kr/upload/thumbnailV2/af0ee9846e3f45a7b59c1a5b449291c6.jpg/dims/resize/178/optimize)
