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| Gettyimagesbank |
The financial regulator's card fee policy in favor of small business owners has backfired as credit card firms are moving to charge higher transactions fees on big firms to offset losses.
They have also laid off their workers to cut costs and minimize lost revenue.
According to industry sources and the firms, eight card companies notified corporate customers with over 50 billion won in annual sales, late January, of an increase of up to 0.3 percentage points in card transaction fees starting March.
This means about 23,000 such customers including major retailers, mobile carriers, hotels and franchisers will now have to bear the amount previously paid by their SME counterparts.
"This is unacceptable," an official from a major mobile carrier said.
In late 2018, the Financial Services Commission (FSC) ordered card issuers cut transaction fees for small business owners, who claimed the fee was the major factor straining their already-deteriorating businesses.
"The logic from the government and card firms is that larger businesses have to bear an increase because we are big. But we have our own concerns in making a continued profit and managing the workforce including unions among other business concerns," a card firm employee said.
Card firms say the new policy is inevitable to avoid a "sudden loss," a shock with much greater consequences than previously expected, forcing them to reduce their workforce on the lower end of their corporate scale, mostly irregular card sales workers.
They estimated that the FSC's new measure will reduce their combined profits by about 800 billion won ($711 million).
"As we have said many times, card companies are left with little option other than to reduce both their investment and workforce. If economic conditions worsen, some may go bankrupt. This is our way to survive," an official from a major card company said.
Domestic credit card companies had a combined 12,534 card sales representatives in January, a 24.7 percent decrease from the year before when they had 16,658.
Shinhan laid off 200 people, the same number of people let go by Hyundai. KB Kookmin cut 10 and Lotte is expected to push ahead with layoffs if ongoing talks on a merger succeed.
The situation occurred after a new measure by the FSC took effect in January reducing transaction fees for small business owners with annual earnings of 500 million to 1 billion won to 1.4 percent from 2.05 percent.
Those that earn between 1 billion and 3 billion won are charged 1.6 percent, down from 2.21 percent.
