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Banking industry

Credit Card Dispute in South Korea Heats Up Ahead of Chuseok Holiday Season

Strategic Insights

— 1 min read

South Korea is bracing for a potential impact on the upcoming Chuseok holiday shopping season as a dispute between credit card companies and retailers over higher transaction fees continues to escalate. BC Card, the second-largest card issuer in the country with 26 million customers, has required retailers like E-Mart, the top discount store chain, to pay increased commission fees, ranging from 2% to 2.35% of their revenues, starting this month. The move has led E-Mart to dump its contract with BC Card and ban the use of credit cards at its 65 outlets nationwide, sparking a wider dispute that affects other card companies and retailers.

Key Takeaways:

  • The dispute between credit card companies and retailers in South Korea is centered around higher transaction fees, with BC Card requiring retailers to pay 2% to 2.35% of their revenues in commission fees.
  • E-Mart, the top discount store chain, has dumped its contract with BC Card and banned the use of credit cards at its 65 outlets nationwide.
  • The dispute has spilled over to affect other card companies like KB Card and LG Card, as well as retailers like Lotte Mart and Wal-Mart Korea Inc.
  • A settlement between BC Card and five major home shopping channels was reached, with the company agreeing to raise commission fees to the lower end of the 2% range, but the agreement is seen as insufficient to resolve the dispute.
  • Wal-Mart Korea has stopped accepting BC credit cards at its newly opened branch in Pohang, further heating up the dispute.
  • Many critics have accused credit card companies of compensating for losses by raising commission fees, with the companies citing the need to normalize their operations after record losses in 2003.

Statistics:

  • BC Card has 26 million customers in South Korea.
  • E-Mart operates 65 outlets nationwide with a large customer base.
  • Wal-Mart Korea operates 16 chain stores in the country, with 786.5 billion won (US$655 million) in sales from the Korean market last year.
  • BC Card has agreed to raise commission fees to the lower end of the 2% range for five major home shopping channels.
  • The credit card companies have sought to raise commission fees to make up for losses after their cash advance business dwindled.

Sources:

  • "Asia Pulse" - September 16 (no date provided)
  • Yonhap (no date provided)

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