[Column] 13 Times Reduced in 12 Years: Who Benefits from the 'Card Fee Rate'?

[Asia Economy Reporter Ki Ha-young] "When the government suddenly implemented the card fee reduction, it seemed profitable at first glance, but looking back, it turned out to be a loss."

The words of self-employed coffee shop owner Bae Hoon-cheon from Gwangju have been a hot topic for days. At the public debate held on the 12th at the Gwangju April 19 Revolution Memorial Hall under the theme "Moon Jae-in Administration's Economic Policy and the Reality of Honam," Bae strongly criticized the current administration's economic policies.

The core issue was government intervention that hinders free competition. Bae lamented that the government's market intervention, supposedly to help small business owners, has made the lives of small business owners like himself even tougher. He pointed out, "As the card merchant fees decreased, card companies cut the fees they paid to VAN companies," adding, "Services that self-employed people used to receive for free have now become paid."

He also said, "We used to get thermal paper for receipts free of charge, but now we have to buy it," and "There is no such thing as free POS (Point of Sale) rental anymore." This is an argument that the government's intervention, which was intended to reduce the card fee burden on small business owners, has instead resulted in harm to them.

Card fee rates have been reduced 13 times since 2007. After the revision of the Specialized Credit Finance Act in 2012, the rates are recalculated every three years. Whenever the recalculation period comes, the fee rates have invariably been lowered. The justification for the reduction is to protect small and micro merchants. As a result, the general merchant card fee rate, which was as high as 4.5% in 2007, has been cut by nearly half to 1.97?2.04%. 96% of domestic merchants receive preferential fee rates ranging from 0.8% to 1.6%.

The problem lies in the fact that the reduction of card fee rates has ironically caused harm to consumers. Card companies' profitability worsened as their core business of credit sales operated at a loss below cost. To compensate, they cut marketing expenses such as card additional services, reducing benefits for consumers. Since the merchant fee recalculation in 2018, about 350 types of cards have been discontinued starting in 2019. According to Bae's claim, the reduction of merchant fees has resulted in no benefits for small business owners, card companies, or consumers.

This year marks the year for the merchant fee rate recalculation after three years. With next year's election approaching, voices calling for further fee reductions are emerging in the political arena. To avoid turning apparent short-term gains into losses, it is time to carefully consider whether lowering fee rates is the only solution.