Payment Fees Vary by Sector:
Simple Payment, E-Commerce, and PG Face Different Business Environments
Authorities to Announce Revised Fee System in the Second Half of the Year,
Emphasizing Voluntary Fee Reductions
As the financial authorities announced plans to unveil a revised fee system for electronic financial service providers in the second half of the year, there is a growing call for the establishment of a sector-specific disclosure framework. This demand stems from the fact that management conditions, such as platform maintenance costs and labor expenses, differ across sectors and should be reflected accordingly.
According to the fintech (finance + technology) industry on July 7, the Financial Services Commission is expected to soon hold a closed-door meeting with 11 fintech companies subject to mandatory fee disclosure. The meeting aims to explain the policy direction of the Financial Services Commission and to hear the industry's perspectives. Since the core of the reform is the disclosure system, this aspect is likely to be discussed.
Industry stakeholders are calling for the inclusion of a sector-specific disclosure framework in the reform plan, distinguishing between simple payment, electronic payment gateway (PG), e-commerce, and online platform businesses. They argue that, similar to card issuers, companies engaged in 'universal' payment services should be categorized under 'simple payment,' while those providing payment services exclusively through their proprietary applications (such as delivery apps) should be classified under 'e-commerce' in the disclosure system.
According to the Korea Fintech Industry Association, as of the first half of this year, the average prepaid electronic payment instrument (prepaid) fee rate for general merchants with annual sales of 3 billion KRW or more varies by sector: e-commerce (Woowa Brothers, SSG.com, 11st, Gmarket, Coupang Pay) at 2.47%, dedicated PG (NHN Payco) at 2.25% (KG Inicis and Toss Payments only disclose card payment fee rates), simple payment (Naver Financial, Kakao Pay) at 1.84%, and online platform (Viva Republica) at 1.59%.
A higher payment fee rate does not necessarily mean higher profit margins. Although the detailed disclosure items are confidential, it is known that platform maintenance costs and labor expenses differ by sector.
In particular, simple payment providers emphasize that it is unreasonable for them to be criticized for charging higher fee rates to small business owners (merchants with annual sales of around 300 million to 3 billion KRW) simply because they are grouped together with other electronic financial service providers, when in fact, so-called 'closed pay' fee rates?those applicable only within their own apps or sites, such as for delivery or e-commerce?are higher.
Industry observers believe that including intermediary sales commission fees incurred during delivery in the disclosure framework for e-commerce companies and requiring detailed disclosure of both online and offline merchant fees would help reduce fairness controversies and business uncertainties.
A representative from the simple payment sector stated, "Given the different business environments across sectors, a 'targeted policy' that distinguishes between them is necessary," adding, "Universal simple payment providers such as Naver, Kakao, and Toss are maintaining a competitive market system by voluntarily lowering fees and preemptively applying preferential rates for small and medium-sized merchants."
A fintech industry official commented, "While there may be differing opinions on other aspects of the reform, such as expanding the scope of mandatory fee disclosure, there is little disagreement across sectors regarding the application of sector-specific disclosure."
The authorities plan to maintain a policy that encourages fee reductions through autonomous competition among companies. Since announcing plans to reform the fee disclosure system in its business plan earlier this year, the Financial Services Commission has been communicating with the industry. While it has suggested the possibility of expanding the scope and items for disclosure, it has not commented on whether it will introduce sector-specific disclosure.
An official from the Financial Services Commission stated, "It is true that we requested a closed-door meeting with the industry as part of our cooperation on the reform plan," adding, "However, it is difficult to disclose details such as whether sector-specific disclosure will be introduced, the timeline, or the specifics at this time."
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