In Korea, the introduction of the small payment cash information usage fee aims to reduce the expenses companies apply when processing both large and small cash transactions. These fees encompass cash handling charges, credit card fees, and fraud protection for non-currency transactions.
These fees attempt to disburse the cost of cash processing to cash payers. Some consumers consider this price an essential company expenditure, while others perceive it as a wasteful expense. The initiative encourages digital transactions to reduce cash use in a nation that has preferred it.
Background on Korea’s Small Payment Cash Information Usage Fee
Starting in 2019, the South Korean government allowed stores to charge a percentage of the price with cash to use as a “small payment cash information usage fee.” The company will be able to charge a small fee for cash transactions that are below 5000 won. The idea was to make sure these stores had savings to cushion themselves against cash transactions and enhance their profit margin.
Reasons for Implementing the Fee
The company cited one of the significant reasons as the fee charged is the same for small cash transactions as for big ones. The small transaction cash card usage fee balances the associated ‘carrying costs,’ such as credit card fees and fraud detection, which retailers take when customers pay with cash instead of via non-cash payment methods.
Impact on Consumer Spending Habits
Due to the entry of this fee, many data prove that cinemagoers are now making fewer purchases, amounting to very small via cash. People dealing with a little bit above 5000 won thresholds use their cards more often rather than money to avoid paying the small fee you have to pay for collecting the cash information.
Rise in Contactless Payments
The increase in mobile wallets or contactless payment cards is a part of the phenomenon of high fees imposed by companies. This is why the payment method for small amounts of money has become easier for consumers since they don’t need to pay in exact cash to avoid transaction costs which amount is a small amount.
Debate Around Reducing a Cash Society
The policy fees are aimed at changing the high-cash society created in South Korea and pushing people to do more digital-based transactions. Some people consider that this is not the job of the business entities, which might affect private sector organizations that work with cash.
Outlook for Cash Versus Digital Payments
A majority of professionals point out that in South Korea, regarding crypto, a prolonged transition from cash to digital is to be expected among young generations who are attracted to trends and new technologies. The cash payment method is likely to still be a significant form of payment for several years, given the provision of fees like crypto wallet and crypto account opening reward programs.
Effect on Business Costs and Profits
Micropayments lead to severe incomes for vendors, although the payments are minimal and there are many people. The amount that has been saved by paying cash has catered to the costs associated with this option. There has been no financial advantage provided by these stores, as was the initial thinking of some of those business people.
Final Thoughts
Korea’s 소액결제 현금화 정보이용료 policy was introduced to help offset business costs from handling cash, but its long-term impacts remain to be seen. The fee does seem to be achieving its initial goal of reducing tiny cash transactions and encouraging digital payment adoption. Cash also continues to play an important role in daily life and is expected to remain prevalent. The consumer behaviour and the balance between money and digital payments evolving over the coming years will help determine if the small payment cash information usage fee leads to more profound changes in Korea’s payment landscape.
