January. 12. 2022
Hyundai Card CEO Questions Buy Now, Pay Later Commission Rates
|Chung Tae-young, Vice President and CEO of Hyundai Card / Courtesy of Hyundai Card|
By Park Jae-hyuk
Hyundai Card Vice President and CEO Chung Tae-young pointed to the disproportionately high commissions that merchants pay large tech companies for their ‘buy now, pay later’ (BNPL) service provision.
BNPL refers to a short-term financing plan that allows consumers to make purchases and pay for them at a later date – often interest-free – regardless of their credit score.
In Korea, Coupang allowed its users to make deferred payments of up to 500,000 won ($ 420) per month, while Naver Financial provided its users with a similar service allowing them to make deferred payments of up to 300 000 won per month.
From this year at the earliest, Kakao Pay and Viva Republica, which operate the Toss mobile money transfer app, will also offer BNPL services widely regarded as “innovative”.
Chung, however, said on Tuesday that the payment option was not new.
“BNPL is the simplest and oldest form of credit card,” he wrote on Facebook. “This has become the current credit cards, along with the growth in the volume of purchases, the assessment of credit scores and the benefits given to users.”
In particular, he mentioned the high commission rates that foreign BNPL service providers charge their affiliate stores.
“The commission rates for BNPL’s services are 5-6%,” Chung wrote. “This is astronomical from the point of view of card companies who are not allowed to charge more than 1% for their services.”
Although the commission rates of Korean BNPL service providers are not as high as those of their overseas counterparts, their rates are still higher than those of credit card issuers.
Additionally, the government asked card companies to further reduce their commission rates late last year, citing the financial hardships self-employed workers faced during the COVID-19 pandemic.