[Korea Financial News] history of domestic credit kadeueop dates back to 1978.
At the time the credit card issuance for overseas travelers in Korea Exchange Bank was substantially departure kadeueop. Domestic credit is kadeueop try despite strength in the government policy of boosting domestic demand after the IMF financial crisis relatively short history, it has grown to represent a means of household consumption.
However, domestic credit kadeueop has the structure of a two-sided market (two-sided market) to co-manage the card company cardholders and merchant members, unlike the US and Europe. In other words, the card members an annual fee for the services provided by the card companies, merchants Member refers to a market structure that pays a fee to the card issuer.
In the case of the domestic credit card market growth rate of the annual fee of the card, registering a level of cut it is large in size than the growth rate of the franchisees to join the merchant fee rate cuts on the same level. This is because a certain size or more merchants mandatory provisions should operator is required to join the franchise in the domestic tax law.
Domestic Income Tax Act 162. Article 2 stipulates the de facto owners of merchant mandatory by specifying that led the credit card merchant sign up if deemed necessary by the Tax Administration as a provider of goods or services to consumers.
Thus franchise membership is a relationship, not a voluntary decision, merchant members decreased despite the increase in commission merchants and card companies are not significantly induced. Naturally card companies will have an incentive to cover the reduced revenue from lower annual fees of cardholders in merchant commissions increase. Typically the pricing of the market is determined by supply and demand. However, the domestic credit card market there are price rigidities (price rigidity) of these economic principles do not work.
By not revealing the price rigidities Iranian merchant members a preference for payment means that consumers are provided, it means the market mechanism does not allow you to adjust product prices in order to secure their interests. What is the reason for the price rigidities exist? If you recognize the current borders of the Income Tax Act, which recommends a franchise is mandatory to determine the main factors price discrimination prohibitions. There prices are shown in the non-discrimination provision is specialized credit geumyungeopbeop 19000000000001, wherein the information is that In other words, the merchant is limited to consumer prices adjusted to provide a non-cash means of payment card.
Stimulate domestic consumption and to increase the transparency of the three won the regulations designed to encourage consumer use of credit cards is actually became yumyeongmusil at this time. Offline unattended and store the Amazon (Amazon Go) via a smartphone app that payment by credit card, such as the opening in the US last year, and now because digital payment period without the possibility of cash settlement of large consumers.
As a matter of fact consumers are likely to prefer the ease of payment occur the effect of this provision, including increasing the non-cash payment rather than cash payments considerably lower.
Moreover, the price of the credit card market rigidities will lead to negative consequences worsen the welfare of consumers and small merchants. First, consumers will have the cash to pay the price difference for the same price as the annual fee cuts, hold the added benefit of receiving points from card companies offer cards consumers in the purchase process. In other words, the cash payment by the consumer do not receive the benefits to the institutional price, subject to price discrimination compared to cardholders. A way to cash subsidies to consumers to cardholders.
Second, as to raise the possibility of a commission merchant, if the merchant of small increases, profitability has become a possession. Because the possession of a member to be added to the cost benefits, companies will pay the transfer commission merchants in card members increased in size.
In particular, it thanks increase cardholders to actively marketing the card companies, payment number of the small screen the more increases naturally (additional service costs to provide for cardholders) and card voucher purchase costs (VAN fees) cardholders acquisition costs do. Increased cardholders acquisition costs and transaction costs are passed on to the merchant commission consequently acts as a commission merchant impression pressure.
Thus, a vicious cycle increased the likelihood commission merchants raise prices is repeated in the domestic credit card market structural rigidities that exist cardholders increased more.
In fact, members of the first half of 2016 companies recruiting costs appear to have risen by about 19% compared to the same period in 2011 with a kadeueop regulations in earnest. However, by making it impossible for the current franchise regulations discriminatory price adjustments themselves, rising merchant fees is to remain intact shares to be borne by the merchant, which will undermine the welfare of much of the merchant.
If the United States were allowed through the Durbin Amendment (Durbin Amendment) undertaken in 2011 so that the merchant can price discriminate against consumers, depending on the type, form of payment cards.
In particular, the amendment is estimated to have contributed to eliminating inefficient pricing of the credit card market rigidities, such as regulations allow you to set a minimum or a maximum payment cards in the amount of goodwill strengthened dimension of merchants.
In addition, the merchant was so over in Europe in the last 2015 Credit Card Fees Regulations (Regulation of the European Parliament and of the council of 29 April 2015) can be limited to discrimination against payment of the consumer.
This conclusion, improvement of price discrimination prohibitions to cause a price rigidity is urgent. This paragraph stipulates that in the specialized credit geumyungeopbeop does not even fit the contemporary atmosphere of the non-cash payment based mobile payment generalization. Moreover, it seems that these provisions need to improve in that it leads to inefficient price rigidities in the credit card market.
To allow a portion price discrimination in the sense of protecting the autonomy of the sales and franchise rights of consumers choose the means of payment seems baramjikhae. Judged by the merchant's revenue, industry, etc., the merchant himself is an urgent revision of current regulations to adjust the selling price in the range of commission merchant.
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