2.6 Trillion Won in Starbucks Prepaid Deposits Over Six Years
Lack of Oversight as Electronic Financial Law Does Not Apply
Over the past six years, the amount of prepaid deposits at Starbucks Korea has reached 2.6 trillion won, with the company earning nearly 40.8 billion won in interest and investment profits from these funds.
According to data obtained by Assemblyman Kang Min-guk of the People Power Party, a member of the National Assembly's Political Affairs Committee, from the Financial Supervisory Service and other sources on October 19, the number of prepaid transactions at Starbucks Korea from 2020 through August of this year totaled 81.13 million, with the accumulated prepaid deposits amounting to 2.6249 trillion won.
The scale of prepaid deposits has increased every year, rising from 184.8 billion won in 2020 to 340.2 billion won in 2021, 440.2 billion won in 2022, 545 billion won in 2023, and 660.3 billion won in 2024. This represents a 257% surge over five years. As of August this year alone, 454.4 billion won in prepaid deposits had already been collected, suggesting that the total for 2024 will surpass last year’s figure. The amount of unused prepaid deposits held by customers also increased by about 123%, reaching 401.4 billion won as of August this year, compared to 180.1 billion won at the end of 2020.
The issue is that these massive prepaid deposits are outside the oversight of financial authorities.
About 40% of prepaid deposits invested in non-bank products
The Starbucks Card (prepaid deposits) is a closed-loop system that can only be used at Starbucks stores, so it does not qualify as a "prepaid electronic payment instrument" under the Electronic Financial Transactions Act. Since 2020, Starbucks has managed the prepaid deposits collected from customers by investing them in cash-equivalent assets such as bank deposits and trusts, earning around 40.8 billion won in interest income. Of these funds, approximately 60.5% (1.0826 trillion won) was placed in bank deposits, while the remaining 39.5% (707.3 billion won) was invested in non-bank products such as short-term money trusts and specific money trusts.
Starbucks has explained that it has invested in stable products, such as short-term money trusts with principal and interest guarantees. However, critics point out that there are limits to customer fund protection, as trust products can be exposed to the credit risk of the managing institution.
Assemblyman Kang Min-guk stated, "It is neglectful of consumer assets that Starbucks Korea is able to generate over 40 billion won in profit by treating prepaid deposits as if they were their own funds, yet is not subject to the Financial Supervisory Service’s oversight or inspection because these do not qualify as prepaid electronic payment instruments under the law." A Starbucks Korea representative responded, "We accept the criticism regarding operational issues and will seek improvements," adding, "We are considering a decision to stop investing in non-bank products."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
