Against a Possible Restructuring
As the South Korean government has decided to reduce credit card commission rates in order to lessen the burden of small business owners from an increase in minimum wages, credit card companies claimed that they would be at the end of their survival rope by losing 1.5 trillion won (US$1.36 billion) of net profits over the next three years. In this regard, the union of credit card workers is increasingly urging the government to come up with countermeasures against a possible restructuring.
During the 7th Credit Finance Forum hosted by the Credit Finance Association at Ferrum Tower in Jung-gu, Seoul, on December 4, a study said that card companies would be forced to cut benefits offered to card users by 900 billion won (US$813.38 million) over the next three years in a bid to offset the anticipated losses from the government’s new credit card commission rate reduction plan. In addition, card companies are expected to see their net profit losses grow to 700 billion won (US$632.63 million) in 2019, 500 billion won (US$451.88 million) in 2020 and 300 billion won (US$271.13 million) in 2012, amounting to 1.5 trillion won (US$1.36 billion) in total for the next three years.
Yoon Jong-moon, a senior research fellow with the Credit Finance Research Institute, had a presentation with a theme of “Card Firms’ Business Environment Degradation and Future Growth Direction.” He said that credit card companies would reduce the additional services not packaged with products in the early stage of the new system and then gradually remove the services packaged with products as well as raise the annual fees for membership. Accordingly, he predicted that the amount of card users’ benefit cuts would rise by 200 billion won (US$180.75 million) every year from 100 billion won (US$90.38 million) next year, the first year of the commission system reform to 300 billion won (US$271.13 million) in 2020 and 500 billion won (US$451.88 million) in 2021. The net profit losses of credit card companies are forecast to total 1.5 trillion won (US$1.36 billion) over the next three years.
Yoon argued that the current proper cost system should be fundamentally reconsidered. The case of the government regulating the credit card commission rate, which is end goods, cannot be found in advanced countries.
As there is growing concern that credit card companies can carry out restructuring due to the losses, the union of credit card workers also kicked against the government’s decision, calling for measures to prevent a massive downsizing. The union of credit card workers, which consists of the labor unions of credit card firms, held a press conference in front of the Financial Services Commission (FSC) building at the Government Complex Seoul on the same day and asked the FSC to come up with measures to prevent card firms’ restructuring as soon as possible. It insisted to raise the commission rate for large businesses with annual revenue over 50 billion won (US$45.19 million). The union of credit card workers said it would go on a general strike when the government doesn’t raise the commission rate for large businesses.