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| gettyimagesbank |
By Kim Jae-kyoung
The financial regulator's move to give fintech firms' access to a bank settlement system will hurt credit card companies, Moody's Investors Service said Monday.
The concern came after the Financial Services Commission announced plans Feb. 25 to establish an open banking system with all banks' mandatory participation and a unified commission rate, which will allow fintech firms to develop payment services based on the banks' settlement system.
In its report, the global credit ratings agency said the plan is credit positive for banks, but credit negative for credit card companies such as Shinhan Card and Woori Card because increased competition from alternative payment services will weigh on their profitability.
"The new plan will erode credit card companies' market share of consumer expenditure, which is uniquely high in Korea," it said.
It pointed out that card issuers are likely to experience a major setback as the new plan was announced as they started to wind down consumer benefits in response to the regulators' plan to cut merchant fee rates announced in November 2018.
"On top of lingering downward margin pressure, the new plan exacerbates the pressure on credit card companies' profitability," it said.
Moody's explained that the key platform that regulators plan to promote is opening the banks' settlement system to third parties.
"Through an open application programming interface with mandatory participation for all commercial banks and significantly lower commission fee rates, third-party fintech companies will be able to?develop payment services at a low cost, utilizing payments through bank account transfers," it said.
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