SEOUL, Oct. 17 (Korea Bizwire) – Use of prepaid cards in South Korea almost halved in the second quarter of this year from three months earlier, government data showed Monday, as card firms are passive about the costly business.
The country’s prepaid card spending stood at 869.3 billion won (US$765 million) in the April-June period, down 47.2 percent, or 164.8 billion won, from the prior quarter.
It marks the first time since the second quarter of 2009 that quarterly prepaid card spending has fallen by more than 100 billion won.
The tumble was attributed mainly to card companies’ reluctance to conduct promotional activities due to a cost burden. Unlike credit cards, prepaid cards are usually discarded once the charged monetary value is used up, which leads to increased costs for issuers.
Another reason is a drop in income from unclaimed money, according to industry sources. Credit card companies had pocketed billions of won in unclaimed prepaid card balances, but they are now required to donate such money to foundations for social contribution under a revised law.
A recently revised standardized agreement also obliges prepaid card issuers to return the remaining balance once a card holder uses 60 percent or more of the recorded amount.
Market watchers further said card companies feel burdened by possible security lapses. In February, Chinese hackers bought information on South Korean prepaid card users and used it to illegally purchase products on online shopping malls here.
Such burdens have forced some credit card units of local banks to scale back their prepaid card operations by suspending the online sales of prepaid cards.
“Some are putting a question mark over whether the prepaid card business is necessary because it is not so beneficial but highly burdensome to credit card companies,” an industry source said, asking not to be named.