As card fee rates decrease for small and medium-sized franchise stores with annual sales below 3 billion won, card companies are looking for countermeasures overseas. They are offering discount benefits for overseas transactions and are also developing the deferred payment market.
According to the card industry on the 20th, card companies are recently offering larger discount rates on overseas transactions due to the Financial Services Commission's card fee reform plan.
The Financial Services Commission lowered the card fee rates for approximately 3.06 million small and medium-sized franchise stores with annual sales below 3 billion won by 0.05 to 0.1 percentage points starting from the 14th. Consequently, the credit card fee rate was reduced by 0.1 percentage points for franchise stores with annual sales below 1 billion won and by 0.05 percentage points for those with annual sales between 1 billion and 3 billion won. The debit card fee rate was also lowered by 0.1 percentage points for all small and medium-sized franchise stores with annual sales below 3 billion won.
The background for lowering card fees is to reduce the burden on small business owners and the self-employed. As the COVID-19 pandemic and economic recession continue, small and medium-sized franchise stores are facing difficulties, and card payment fees pose a significant burden on small business owners, prompting this measure to ease the burden. Accordingly, financial authorities decided to partially lower the franchise card fees, which are recalculated every three years.
Card companies have deepened their worries due to this reduction decision. Card fees are a major revenue source, and it was anticipated that the reduction would decrease revenue by more than 300 billion won annually. While the franchise store fee rates continue to decrease, the costs (operating expenses, funding rates, etc.) for the card companies are on the rise, increasing their burden.
Card companies are responding by offering larger discount rates with promotions for card payments used abroad to meet the surge in demand for overseas travel. Lotte Card has launched four types of cards in collaboration with travel YouTuber Pani Bottle; among these, using the "Trip to RoKa Pani Bottle Edition" card provides an unlimited 4% discount at overseas merchants, regardless of the spending amount.
Shinhan Card is enhancing benefits related to overseas travel. When paying with the "Shinhan SOL Travel Card," customers can receive discounts on Shinhan SOL Travel overseas travel insurance. They are also offering package travel discount benefits through partnerships with travel agencies.
In addition, card companies are expanding their deferred payment business to capture overseas markets such as Southeast Asia. Shinhan Card announced plans to launch a small-amount deferred payment (BNPL) service through its local subsidiary, Shinhan Vietnam Finance (SVFC), in partnership with Mobile World, Vietnam's largest retail distribution company, at the end of last year. Lotte Card also partnered with ZaloPay, an e-commerce and e-wallet company in Vietnam, in April last year to launch BNPL services locally through Lotte Finance Vietnam.
A card industry official noted, "As earning from fees has become challenging, the overseas market is almost the only breakthrough for performance improvement," adding, "Despite the ongoing discussions of economic recession, the number of overseas travelers is increasing, so from a card company perspective, this can be considered a viable strategy."