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Korea's credit card system : Issues and potential measures

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Frame of Image Industry 3. Problems with the Transaction Scheme for Korean Credit Cards Ⅳ. Potential Measures for Improvement 1. Mandating a Merchant Member Pool System 2. Limits on Merchant Fees 3. Promoting Debit Cards
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Korea’s Credit Card System: Issues & Potential Measures
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Korea’s credit card industry contains both 3-party and 4-party schemes, but unlike most countries, the share of 3-party schemes centered on independent card companies is markedly higher.
	 ○ In a 3-party scheme, the card companies performing both member services such as card issuance, and acquiring transaction from merchants, while in a 4-party scheme these are separated. 	 ○ BC Card is the only company to have adopted a type of 4-party scheme in Korea, performing acquiring business for 11 member card companies, but unlike a typical 4-party scheme, it does not determine merchant fees, and only collects an agency fee from member banks.
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The dominance of the 3-party scheme presents the following challenges.
	 ○ Individual credit card companies recruit card user members and issue cards, while each card company must recruit merchant members separately, which entails high costs for recruitment and management, making it hard for new card companies to enter. 	 ○ Merchants are only able to ask acquiring transactions to the relevant credit card company, so they have low bargaining power in the determining of the merchant fees that can be called the cost of processing credit card transactions.
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Summary
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Full Text
Title Korea's credit card system
Similar Titles
Sub Title

Issues and potential measures

Material Type Reports
Author(English)

Lee, Jae-Youn

Publisher

Korea Institute of Finance

Date 2011-01
Series Title; No Finance VIP Series Vision, Insight and Policy / 2011-01
Pages 39
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic System
Holding Korea Institute of Finance