4.017 Trillion Issued Last Chuseok, Only 100 Billion This Seol
Discount Rate Reduced from 10% to 7% to 5%
Residents and Small Business Owners Cheer, but Government Cuts Budget
Each District Issues 4 Billion... Sales on 30th-31st
The Seoul Metropolitan Government and autonomous districts' local currency gift certificates, known as Seoul (local) Love Gift Certificates, are seeing a continuous decline in issuance volume and discount rates despite their high popularity and demand.
Last week, Seoul announced that it would issue 100 billion KRW worth of Seoul Love Gift Certificates at a 5% discount for the Lunar New Year, which is only one-quarter of the amount issued during last year's Chuseok (401.7 billion KRW) and one-third of last year's Lunar New Year issuance (300 billion KRW). The discount rate has also decreased from 10% in 2022 to 7% last year, and now down to 5%.
Regarding the decrease in issuance volume, Seoul explains that the amount of outstanding gift certificates previously issued was large, so they reduced the issuance scale. However, the autonomous districts, which want to expand the issuance volume, have a different explanation. They claim that the government's significant budget cuts for gift certificate issuance support inevitably led to reductions in both issuance volume and discount rates.
The discount rate benefits consumers, and the government, Seoul city, and each autonomous district support a certain percentage of this discount. In 2021 and 2022, 2-4% of the 10% discount rate was covered by government budgets, Seoul city supported 4.5-6%, and each district contributed 1.5-2%. However, after the government budget was drastically cut, Seoul city, feeling the burden, had no choice but to reduce both issuance and discount rates.
Last year, Seoul city supported 4% of the 7% discount, and the districts increased their support to 3%, but this year, Seoul city will only support 2%, causing the discount rate to drop to 5%.
The increased demand due to the popularity of these gift certificates can also be seen as a factor. Although the certificates were introduced and promoted with a high initial discount rate, there is a rationale that adjusting the discount rate is necessary to build a sustainable long-term model.
The core of Seoul Love Gift Certificates' popularity lies in the discount rate. Consumers can also receive income tax deductions during year-end tax settlements, and the certificates are convenient to use at various places such as convenience stores, cafes, hospitals, pharmacies, academies, and small to medium-sized marts.
They positively contribute to increasing sales for small business owners by promoting local consumption. Because of this advantage, each autonomous district actively issues local love gift certificates, and district mayors argue that the issuance volume should continue to increase.
Lee Seung-ro, Mayor of Seongbuk District, recently stated, “The demand for gift certificates from small business owners and residents is explosive, and the effectiveness in revitalizing the local economy has been proven, but national and city subsidies have been continuously reduced since the first year of issuance. The reduction in the gift certificate budget is a representative case where government policies go against the expectations of small business owners and residents.”
Due to the high popularity, the gift certificates sell out quickly each time, and the sales website has crashed. Therefore, this Lunar New Year, sales will be split between January 30 and 31, and the sales hours will be distributed from 9 a.m. to 5 p.m. Issuance will be 4 billion KRW per autonomous district.
Purchases can be made up to 500,000 KRW per person per month through five applications (apps), including ‘Seoul Pay Plus (Seoul pay+)’, Shinhan Sol Bank, T-money Pay, Moneytree, and Shinhan Sol Pay. The holding limit is 1.5 million KRW per person.
Meanwhile, starting next month, Seoul city plans to reorganize the usage locations of Seoul Love Gift Certificates to focus on small business owners. Use of the certificates will be restricted at cram schools with annual sales exceeding 3 billion KRW and stores handling precious metals.
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