Credit card promotions by major supermarkets are on the verge of disappearing.
Credit card companies notified major supermarkets, government-affiliated organizations, and financial companies that it would increase fees on transactions involving credit cards and debit cards. Some major supermarkets are looking into extreme measures such as cancellation of promotions which will greatly impact consumers as a result.
Credit card companies and major franchises that have been maintaining symbiotic relationship are starting to turn their backs against each other as South Korean Government plans to reduce card transaction fees for small franchises.
According to industries, 8 major South Korean credit card companies such as Shinhan, Samsung, and Hyundai notified major supermarkets that make more than $44.5 million (50 billion KRW) it would increase fees on credit card and debit card transactions up to 0.3%.
This is the first time when a credit card company notified a major supermarket about its plan to increase fees on card transactions as major franchise supermarkets have been credit card companies’ biggest customers since credit card companies have been earning fees based on number of transactions.
Both sides have totally different views on this plan. While credit card companies are stating that their plan will not cause any problem since they came up with new rates through proper calculation, major franchise stores are stating that this plan is clearly a positive discrimination.
Although credit card companies tried to negotiate with major markets, it seems that a possibility of them coming to an agreement is very low since there is a chance that this issue may lead to a legal battle. Since there is no clause within Specialized Credit Financial Business Act stating that credit card companies can force major franchise stores to pay transaction fees, legal battle will be inevitable if major franchise stores reject negotiations from credit card companies.
“Why do we have to be the ones to be the ones to suffer from South Korean Government’s plan to provide financial benefits for small businesses?” said a representative for a major distributor. “Because credit card companies proposed one-sided calculation on transaction fees to us, we are considering taking legal measures.”
Markets are also thinking about cancelling every customer service that they have carried out with credit card companies. If major franchise stores pass the financial burden they are expected to receive from credit card companies to prices of their services and products, it will be consumers at the end who will be impacted the most.
Credit card industry is also expected to reduce additional services and increase annual credit card fee starting from this month.
“It seems that credit card companies are taking such actions as South Korean Government is reducing credit card and debit card transaction fees.” said director of Pi-Touch Institute. “South Korean Government must improve its constitution by establishing systems that are friendly to markets so that card services can contribute to growth of our economy.”
As this situation has gotten worse, financial authorities are telling major franchises that they will punish them if they request unfairly low transaction fee from credit card companies. However, such treat has almost zero effect as it is not based on legal grounds.
Staff Reporter Gil, Jaeshik | osolgil@etnews.com