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The Financial Services Commission said on Sunday it would draw up a comprehensive plan to restructure the troubled credit card industry, which is under criticism for pursuing rapid expansion at the risk of generating market bubbles.
“The average number of credit cards held by a single individual rose to 4.7, which is more than the 4.6 seen shortly before the credit card bubble burst in 2003,” said an FSC official. “There is a need to tightened standards that should be met for issuing credit cards.”
The FSC’s move came as the country struggles to lift its slowing economy amid heightened concerns about risks such as the eurozone sovereign debts and a growing number of Korean consumers who find it difficult to repay their debt.
The country’s top financial regulator also plans to overhaul the membership point system being used as one of key marketing strategies. Under the current point system, members appear to benefit as they can use the points generated by purchases via credit cards, but the added cost has been forcefully transferred to credit card firms’ corporate clients, who in turn tend to raise prices for their goods and services.
At the hear of contention is that credit card firms refuse to lower commission fees they collect from any transaction occurred, while businesses complain the fees are too high. Credit card operators, meanwhile, continue to cite increasing marketing costs, which are partly linked to the widespread membership point system and related discount events.
The FSC said it will also modify the obligatory handling of credit card payments at all the business clients of credit card services. Under the system, for instance, a Korean restaurant cannot refuse credit card payment. Originally, the policy was aimed at securing more taxes and making transaction flow more transparent, but smaller businesses claim that it only brings more profits to credit card firms and results in burdensome transaction fees they have to shoulder.
A task force team will be set up soon to explore reform measures for the credit card industry and specific action plans will be announced through November, the FSC said.
By Yang Sung-jin (insight@heraldcorp.com)
“The average number of credit cards held by a single individual rose to 4.7, which is more than the 4.6 seen shortly before the credit card bubble burst in 2003,” said an FSC official. “There is a need to tightened standards that should be met for issuing credit cards.”
The FSC’s move came as the country struggles to lift its slowing economy amid heightened concerns about risks such as the eurozone sovereign debts and a growing number of Korean consumers who find it difficult to repay their debt.
The country’s top financial regulator also plans to overhaul the membership point system being used as one of key marketing strategies. Under the current point system, members appear to benefit as they can use the points generated by purchases via credit cards, but the added cost has been forcefully transferred to credit card firms’ corporate clients, who in turn tend to raise prices for their goods and services.
At the hear of contention is that credit card firms refuse to lower commission fees they collect from any transaction occurred, while businesses complain the fees are too high. Credit card operators, meanwhile, continue to cite increasing marketing costs, which are partly linked to the widespread membership point system and related discount events.
The FSC said it will also modify the obligatory handling of credit card payments at all the business clients of credit card services. Under the system, for instance, a Korean restaurant cannot refuse credit card payment. Originally, the policy was aimed at securing more taxes and making transaction flow more transparent, but smaller businesses claim that it only brings more profits to credit card firms and results in burdensome transaction fees they have to shoulder.
A task force team will be set up soon to explore reform measures for the credit card industry and specific action plans will be announced through November, the FSC said.
By Yang Sung-jin (insight@heraldcorp.com)
