Korea to Lower Merchant Discounts for Smaller Merchants

by Mercator Advisory Group 0

As further proof that the interchange level is under pressure around the world, Korean credit card companies are taking actions to lower merchant discounts.

Korea’s major credit card firms said on Monday they would slash the transaction fees they collect from small merchants as a reluctant response to the growing calls for a rate cut to bolster their shaky profits amid regulatory pressure.

The lowering of the transaction fee rate came as the Lee Myung-bak administration is staging its “shared growth” drive with key government agencies and regulatory bodies putting pressure on firms in the private sector.

Korean credit card firms have been applying favorable transaction fees to only large retail chains, while charging a regular fee for small players ― a practice that recently prompted the country’s financial regulator to consider allowing merchants to reject small card payments.

The plan to restrict small payments has been scrapped for fear of dampening the already worsening spending sentiment amid growing worries over the country’s slowing economic growth.

Credit cards penetration and usage among Korean consumers are high as issuers make cards easily available to consumers. While merchants are also benefiting from the increased sales (thanks to more convenient payment methods) they have long been complaining about the fee levels they have to pay for accepting cards.

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