SEOUL, Dec. 12 (Korea Bizwire) — The government’s plans to cut credit card commission fees will cost credit card firms about 700 billion won (US$619.8 million) per year in lost revenue, a government report showed Wednesday.
Financial authorities unveiled two plans this year to reduce credit card commission fees for small merchants in a move to support self-employed business owners at a time when the nation’s economy is showing signs of sluggish growth amid weaker consumption.
Under the plans, credit card processing fees for small merchants with annual revenue of between 500 million won and 1 billion won will be lowered to 1.4 percent per transaction from 2.05 percent.
For merchants with average revenue of between 1 billion won and 3 billion won, credit card processing fees will be cut to 1.6 percent per transaction from 2.21 percent.
According to the report by the Financial Services Commission (FSC), small merchants with annual revenue of between 500 million won and 1 billion won are expected to save 219.7 billion won per year, thanks to the fee cut.
For merchants with average revenue of between 1 billion won and 3 billion won, they are expected to save 200.1 billion won per year, the report showed.
Analysts expected credit card firms to reduce marketing spending as their profit will be reduced by the fee cut.
Earlier this month, Moody’s Investor Service said the fee cut is “credit negative for credit card companies, such as Shinhan Card Co. and Woori Card Co., whose profitability will significantly decline next year.”
For Shinhan Card, its net income may drop as much as 15 percent, and Woori Bank could see a 25 percent decline, Moody’s said.