Although the Apple Pay service has been officially launched, the card industry is worried that the burden of fees will increase./Newsis
Although the Apple Pay service has landed in Korea, the card industry is not happy about it. This is due to the concern that the fee burden will increase in the future. In the industry, the convenience of paying for iPhone users has increased, but they are unanimous in saying that a new market has not been opened.
According to the financial industry on the 26th, the exclusive right to use the Hyundai Card disappeared in the process of launching the domestic Apple Pay service. Other credit card companies may also offer the service. As the preference for iPhone is gradually increasing, focusing on the MZ generation and the Alpha generation, it is expected that other card companies besides Hyundai Card will enter Apple Pay in the long term.
However, the card industry notes that the burden of fees will increase. Apple charges partner card companies 0.15% of the payment amount as a payment fee. Given that the merchant fee currently received by card companies is 0.5-1.5% of the payment amount, the separate payment fee imposed by Apple is equivalent to 10-30% of the total fee.
It is noted that the appearance of Apple Pay is difficult to become a new market in the payment market. Meanwhile, credit card companies have tried to switch platforms by strengthening their apps to increase convenience for iPhone users. Apple Pay can also act as a reason for the decrease in demand for its own PayApp.
Samsung Pay was also found to be handling fee income separately. There are 14 million Samsung Pay subscribers in Korea. It is a ‘catfish’ that accounts for 24% of the payment and settlement market share. The burden on the industry is expected to increase if the levy of Samsung Pay fees becomes a reality.
Last year, the net profit of eight domestic credit card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Woori, Lotte, Hana, and BC) was 2,606.2 billion. Compared to 2021, it decreased by 4%. The industry cites lower franchise fees as one of the factors behind declining profitability.
In fact, revenue from franchise fees increased by 20.6 billion earned last year. However, ‘SG&A expenses’ spent by credit card companies for merchant sales and management also increased by KRW 138.7 billion. It has become difficult to expect a profit from the fee business, which is the main business of credit card companies in the first place.
However, it is also impossible to pay payment fees with merchants for using Pay. Last month, the Financial Services Commission officially announced that fees related to Apple Pay could not be passed on to consumers and merchants. Even if Samsung Pay pays-as-you-go, it is very likely that the card company will have to pay all the fees.
The upper limit on merchant fees that credit card companies can accept has been gradually lowered. In 2007, it was possible to receive up to 3.6% of the payment amount, but it decreased every year, falling to 1.5% last year. This is why the credit card industry is raising its voice in discussions on recalculating fees.
Negotiations on merchant fee increases, which have continued since last year, are also slowing down. The Financial Services Commission launched a task force (TF) to improve card fees in December 2021 and began discussing related issues. But still unable to come to a conclusion. In the industry, there is a view that it is practically useless.
A financial industry official said, “Discussion on the recalculation of credit card fees is an issue that has been continuously requested.”
