SEOUL, Nov. 23 (Korea Bizwire) – Large retailers in South Korea are claiming that they are being discriminated against by card firms over commission rates which could eat into their bottom lines amid a protracted economic slowdown, industry sources said Monday.
According to the sources, some large-sized retailers have demanded a reduction in commission rates paid to card firms after the government forced card issuers to cut them for smaller players to help ease financial burdens.
For small merchants with annual sales of 200 million won or less, the commission rate will drop from the current 1.5 percent of the transaction, to 0.8 percent starting next year.
The rate on mid-sized merchants with 2 to 3 billion won in sales will go down to 1.3 percent from 2 percent, while the rate on retailers with less than 1 billion won in sales will drop to 1.9 percent from 2.2 percent.
Bigger chain stores are the only group whose commission fees will remain unchanged at the current level of 1.96 percent.
“There has been a growing voice of concern that the reduction plan will spark backlash from larger stores, and this case would be a trigger,” said an official of a credit card firm.
Noting that giant retailers have also been struggling with weak domestic demand, another card firm official expected them to “proactively seek how to share the burden with the card firms in any way.”
But the demand “cannot be accepted, as the fees cut decision for small businesses is forecast to lead to the decrease of card firms’ gross profits per year by 670 billion won,” he added.
The recent outcry from large retailers is reminiscent of the months-long tussle between large retailers and financial authorities over the rate reduction in 2012.
Claiming that they were forced to unfairly bear discriminatory commission rates, some large retailers and department stores had suspended reward programs for customers in a show of protest against the move.
“As both sides have been into cost reduction amid the slowing economy, it would not be easy for them to split the gap anytime soon,” an industry watcher said.