South Korean financial regulators are, reportedly, set to put pressure on global credit card giants Visa and MasterCard to slash transaction fees charged from local cardholders and card firms.
An official from the Financial Supervisory Service was quoted by The Korea Times as saying, "Visa and MasterCard have taken too high commission fees as well as annual membership fees, abusing their market dominance position.
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"We are now considering taking measures to make them revise such unfair practices," the official added.
Visa and MasterCard will be mandated by the regulators to bring their membership and commission fees in South Korea on par with what they charge in other countries, the news agency reported.
Both the companies in partnership with South Korean card firms are reportedly charging up to 1% commission from the country’s consumers on purchases from affiliated cards in foreign countries. Consumers were also made to pay these firms even for domestic transactions.
in 2012, Visa and MasterCard received KRW135bn ($125.7m) in fees from local firms for their customer’s domestic transactions.
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By GlobalDataThe report suggest that regulators may also bring in a new law to stop "kickback practice," in which global credit companies offer local credit card firms rebates in return for maintaining the partnership with them.
The so-called Dynamic Currency Conversion (DDC) system is reportedly also under the regulators’ scanner.
In DDC system, cardholders are asked whether they will pay in won or dollars, and if they choose to pay in won, they also later have to pay exchange commission fees in the event that their purchase is changed into dollars again.
