What’s good for one should be good for all, a growing list of merchants and others that accept credit cards in South Korea contend.
Card networks in that country are being squeezed as auto conglomerates have joined insurers and small merchants in protesting against card interchange rates.
Their challenge has its roots in the beginning of the year when South Korea’s largest automaker, Hyundai Motors Ltd., convinced networks to lower their rate to 1.7% from the 2.2% of the sale.
Now three other local automakers, Renault Samsung Ltd., GM Korea Ltd. and Ssangyong Motor Ltd., also want the card firms to lower the rates applied to their sales as well, according to local news reports.
However, doing so could harm the card networks, a spokesperson for the Credit Finance Association of Korea tells PaymentsSource. Because car sales can be above 20 million won (US$17,770 or 13,000 euros), any cut in fees means a huge loss in interchange income, she says.
The networks may have cut their rates for Hyundai because of its dominant position in the country’s car market, but they would be badly hurt financially if they yield to the demands from other automakers then, the spokesperson says.
At the root of the current fee chaos in South Korea is a decision by the country’s card networks to bend to Hyundai’s demands. Hyundai warned that it would stop accepting credit cards for the sale of its cars unless the networks accepted its demand, and it banned cardholders from KB Card Ltd. from paying with cards as a warning shot.
In response, six networks, including KB, Samsung Card Co. Ltd. and BC Card Co. Ltd., caved the demand, which drew the ire of Financial Supervisory Service, which viewed the rate cuts as a case of favoritism towards big business even as card networks continued to hear calls from smaller merchants for fee cuts.
Following growing protests, South Korea’s major card networks announced in October they would cut the interchange fees they collect from small merchants (
Insurance companies similarly have complained that the costs they incur when customers’ use their cards to pay insurance premiums are too high at 3%. They want the rate reduced to about 1% (
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