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Data shows small card payments account for 30.6% of total transactions
The Korean government is expected to keep the current credit card payment system, a turnaround from its previous stance announced on Monday, backing down to protests from small retailers and consumers.
The Financial Services Commission said Monday that it was considering allowing businesses to reject credit cards for small payments, with the potential lower limit set at 10,000 won ($8.55) similar to the United States and Canada, which impose a $10 cap.
But small retailers and consumers expressed concern over the proposed change that could dampen spending at a time when the country’s economy is faced with greater challenges at home and abroad.
The FSC previously suggested that a ban on small payment should be restricted due to the higher costs placed on the corporate clients who have to pay a hefty transaction fee to the credit card firms, often at the expense of their own operating margins.
But small payment has already settled in the market, the regulator’s data showed on Thursday. In September, the number of credit card payments for 10,000 won or less reached about 202 million, accounting for 30.6 percent of total transactions. The figure was up from 29.2 percent in July and 29.9 percent in August.
Back in 2008, when Korean consumers began to massively adopt the credit card payments, the number of small payments was less than 1 percent of the total transactions.
Although the absolute volume of small payments on credit cards is rising at a brisk pace, its combined value remains at a fraction of the total amount of money changing hands through plastic, at 2.5 percent or 1.6 trillion won.
The fallout is that retailers have to bear the greater burden for such transactions since they find it difficult to refuse customers brandishing credit cards for small purchases. Credit card firms also see their maintenance costs for the system inflated beyond the proper margin rate.
By Yang Sung-jin (insight@heraldcorp.com)
The Korean government is expected to keep the current credit card payment system, a turnaround from its previous stance announced on Monday, backing down to protests from small retailers and consumers.
The Financial Services Commission said Monday that it was considering allowing businesses to reject credit cards for small payments, with the potential lower limit set at 10,000 won ($8.55) similar to the United States and Canada, which impose a $10 cap.
But small retailers and consumers expressed concern over the proposed change that could dampen spending at a time when the country’s economy is faced with greater challenges at home and abroad.
The FSC previously suggested that a ban on small payment should be restricted due to the higher costs placed on the corporate clients who have to pay a hefty transaction fee to the credit card firms, often at the expense of their own operating margins.
But small payment has already settled in the market, the regulator’s data showed on Thursday. In September, the number of credit card payments for 10,000 won or less reached about 202 million, accounting for 30.6 percent of total transactions. The figure was up from 29.2 percent in July and 29.9 percent in August.
Back in 2008, when Korean consumers began to massively adopt the credit card payments, the number of small payments was less than 1 percent of the total transactions.
Although the absolute volume of small payments on credit cards is rising at a brisk pace, its combined value remains at a fraction of the total amount of money changing hands through plastic, at 2.5 percent or 1.6 trillion won.
The fallout is that retailers have to bear the greater burden for such transactions since they find it difficult to refuse customers brandishing credit cards for small purchases. Credit card firms also see their maintenance costs for the system inflated beyond the proper margin rate.
By Yang Sung-jin (insight@heraldcorp.com)
