When transferring money through a bank mobile application (app), you may sometimes hit the wrong account number and make an erroneous remittance. As 85% of bank deposit and withdrawal transaction (as of the end of the first quarter of this year) are conducted via internet banking, this type of remittance mistake happens more often than you might think.
In the past, the remitter had to contact the recipient directly to resolve the issue, but to reduce this hassle, the "erroneous remittance return support" system was introduced in Jul. 2021. When the remitter applies for return support to the government agency Korea Deposit Insurance Corporation (KDIC), KDIC contacts the recipient to guide the return, recovers the mis-sent money, and returns it to the remitter. Since this system was implemented, the total amount of erroneous remittances that KDIC had returned through the end of last year was 15.6 billion won.
However, KDIC itself has posted a loss of 4.3 billion won on this program. The expenses going out exceed the money earned from fees. Looking at KDIC's "erroneous remittance return support account," annual operating revenue from erroneous remittance return fees and the like was 100 million to 200 million won, while operating expense, including labor costs and interest expense, exceeded 1 billion won every year. More than 80% of operating expense was spent on labor costs, and the rest went to interest on money borrowed from financial companies to cover the deficit.
At this rate, the losses are structurally bound to keep growing. Moreover, as the cap for erroneous remittance return support was raised this year from 50 million won to 100 million won, demand is expected to increase further, making a fundamental fix to the deficit business structure urgent. In May, KDIC prepared measures to resolve the accumulated deficit in the erroneous remittance return support account and commissioned an external research project to overhaul the fee system, and it plans to receive the report next month and start crafting countermeasures.
KDIC believes it will be difficult to fix the deficit structure simply by raising the fee charged to remitters. KDIC currently collects from remitters actual costs such as postage, text message sending expense, and stamp tax and service of process fees related to payment orders, plus 3.41% of the erroneous remittance return amount (7.1% when applying for a payment order) as a fee. Unless the fee rate is raised significantly, it will be hard to expect meaningful operating revenue, and it could also harm consumer benefits.
The solution is for banks to make annual grants to the erroneous remittance return support account, but it is uncertain whether banks will comply. A KDIC official said, "In the past, banks handled this issue on their own, but now a government agency is doing it on their behalf. We believe it is reasonable to create a system in which financial companies such as banks that have benefited from this system also pay an appropriate price, like financial consumers who pay fees."