PG Association "Card Companies Shift Fee Losses... Authorities, Please Intervene Actively"

"Unilateral Notification of Fee Increases by Mail"

Payment Gateway (PG) associations requested financial authorities on the 21st to "actively intervene," claiming that credit card companies are shifting fee losses onto them.

The PG associations stated, "Credit card companies informed PG companies of PG fee increases at a rate higher than the losses caused by fee reductions for small and medium-sized merchants," adding, "They unilaterally notified us by mail without detailed explanations or prior consultations regarding the increase."

The PG associations argued that the practice of credit card companies shifting losses, which the associations raised last November, has not improved.

They pointed out that every billing cycle, credit card companies are passing on the cost burden to PG companies and merchants to compensate for revenue losses caused by fee reductions for small and medium-sized merchants. They urged for improvements in this practice.

An industry insider said, "When the merchant fee rate decreases due to the recalculation of eligible costs, the burden ultimately shifts to PG companies," and insisted, "The detailed basis for fee increases must be transparently disclosed."

Earlier, at the 'Eligible Cost System Improvement Task Force (TF)' meeting held in August last year, authorities stated, "When credit card companies raise fee rates, they plan to explain the reasons for the increase to merchants and establish a separate channel for objections."

The industry responded that despite discussions on win-win system improvements among credit card companies, authorities, and merchants at the Eligible Cost System Improvement TF, the credit card companies’ practice of shifting costs has not been broken.

PG companies raised their voices, urging authorities to thoroughly review the basis for credit card companies’ eligible cost calculations. They pointed out the need to verify whether only costs necessary for credit card operations were reflected or if loan, other business marketing expenses, and fixed costs were included.

According to Article 25-4 of the Specialized Credit Finance Business Supervision Regulations, the association explained that only costs reasonably borne by credit card merchants should be reflected in the calculation of merchant fee rates.

Under the regulations, costs unrelated to services provided to credit card merchants should not be borne by the merchants. Also, when determining merchant fee rates, objective, fair, and reasonable supporting data must be used.

An industry insider pointed out, "Credit card companies claim it has become difficult to generate profits from their core credit sales business due to fee reductions for small and medium merchants, but ultimately, the losses are being passed on to PG companies and general merchants, who act as representative merchants for lower-tier merchants."

They added, "To reduce recurring conflicts between sectors and strengthen industry competitiveness, authorities must actively intervene and improve the system."