A Study on Merchant Membership Obligations in the Korean Credit Card Industry (in Korean)

Sun-Joong Yoon (), Kyeong-Hoon Kang () and Jeong Gyu Kim ()
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Sun-Joong Yoon: Dongguk University
Kyeong-Hoon Kang: Dongguk University
Jeong Gyu Kim: Tokyo Representative office, the Bank of Korea

Economic Analysis (Quarterly), 2013, vol. 19, issue 4, 113-141

Abstract: Korean government and related industry are exerting all possible efforts for a reasonable credit card fee system. Recently, they proposed the new credit card fee standard that decreases the card fees of middle- and small-sized merchants. However, this fee system is vulnerable to changes in the policy intention of government and in turn, has the possibility of conflict (dispute) between credit card companies and merchants. Using the theory of two-sided markets, this paper explores the impact of the credit-card-receipt-obligation for merchants on a merchant fee structure as well as an amount of credit cards used. According to our model, the obligation for credit card receipts distorts the credit card fee system and as a result, can increase the amount of credit cards used extremely. Although the credit card obligation for merchants enhances the convenience in the payment system and plugs a tax loophole, it surely reduces the bargaining power of merchants in the fee settlement process. Therefore, the credit card obligation rule for merchants should be reconsidered based on the market principle.

Keywords: credit card; two-sided markets; merchant fee; interchange fee (search for similar items in EconPapers)
JEL-codes: D14 E42 (search for similar items in EconPapers)
Date: 2013
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