🇺🇲Current status and problems of payment service(EN)

Although low-fee payment and settlement services using pin technology are spreading around the world. Looking at card-based payment purchases in 2015 to date, American Express, Diners Club/Discover, JCB, Mastercard, UnionPay, and Visa totaled approximately 20.5 trillion dollars ($20.5 trillion) of purchases, and 2,908 trillion won in one currency. It is worth 750 trillion won, and this trend continues to increase, and it is predicted that by 2025 it will reach 55 trillion dollars ($54.891 trillion) and about 6,1435 trillion won. (2)

This card-based payment trend continues to increase, and a Statista forecast shows that in 2023, card transactions in the United States, Visa card transactions, amount to about 5571 trillion won ($5.09 trillion), followed by Mastercard at about $5.09 trillion. It is expected to reach 2,529 trillion won ($2.27 trillion). (3)

Similarly, Korea also occupies a large portion of card-based payment purchases. The ratio of daily average card payments to total payments was 54.8%, the highest among all payments, check/debit cards 16.2%, cash 13.6%, account transfer 15.2%, and digital currency 0.2%. (4)

Conversely, in China, about 90% of mobile payments are made with WeChat Pay (fee 0.6%) and Alipay (fee 0.5%). The Korean government also lowered card fees by 0.8% for small businesses with KRW 300 million or less, 1.3% for small businesses with KRW 500 million or less, and 2.1% on average in July 2017 to ease the burden of credit card fees on business operators, but the effect did not meet expectations.

For example, according to a research study, convenience store card fees averaged 9 million won, 31% of operating profit, and bakery franchises accounted for 52% of operating profit with 12 million won. In spite of the government policy, fees are still a heavy burden on small business owners while card payment practices are dominant. (5)

In addition, in order to receive the TAX Refund, the payer must apply for the TAX Refund and register/proof separate evidence one by one, and the operators also have to establish a separate system to process the TAX Refund of the payer.

■ Complex processing procedures due to the payment structure of existing financial institutions

The payment service of the existing financial sector provides convenience and safety to people on the surface, but in the process from actual payment to settlement, many middlemen are involved in addition to buyers and sellers. In the process of participating in these third-party financial intermediaries, fees are incurred, and as a result, the cost paid by consumers increases.

In the existing payment market, several parties, such as consumers, PGs, VANs, and credit card companies, participate according to their roles. Participants are responsible for the following roles during the payment service.

(1) Consumers purchase goods or services online/offline.

(2) PG/VAN company encrypts payment information with card terminal and transmits it to acquirer.

(3) The acquirer requests electronic approval from the card issuer.

(4) The card issuer delivers a message about whether the card is available for payment to the merchant.

In general, in the case of a credit card payment service, 5 to 8 parties participate from payment to settlement in the process of processing a single transaction, and the payment is processed through a total of 13 steps.

Due to such a complex structure and procedure, the payment fees paid by merchants increase, and the computerization process continues in a vicious cycle that takes a long time. Such a complex structure affects the fee rate, and as little as 0.1% to as high as 1% of card company fees are additionally generated.

■ Settlement Cycle Problem

The first step in verifying a transaction is immediate, as the transaction is authorized to enter the payment system, and the card user's account is checked to ensure that there are sufficient funds to purchase. However, after that, it goes through approval by various banks, credit card companies and related intermediaries until the settlement and payment stage are reached. puts a great burden on Among them, online payment settlement takes from 7 days to a maximum of 90 days. In this case, until payment is received, external capital is raised to cover the cost of raw materials for goods/goods, and additional financial costs are incurred.

Recently, under the leadership of large platform companies, various simple payment systems with improved settlement cycles are being developed. However, in the case of these platforms, there is a problem in that merchants are burdened with fees because they apply a high commission rate (company N's credit card payment fee of 3.74% / nonbankbook deposit fee of 1%). KONPAY intends to develop a new payment solution by integrating the structural inefficiency of the existing financial payment network with block chain technology, the cryptocurrency economic ecosystem, and the integrated payment solution service knowhow accumulated by KSNET+.

■ Merchant membership fee and additional payment fee

In general, small business owners must pay subscription (registration fee) costs to PG or VAN companies in order to use payment services. This registration of payment services sets the merchant fee rate, where both PG and VAN companies charge lower merchant fees to large businesses such as Amazon rather than small businesses, so small business owners have to pay higher transaction fees than large department stores or large online shopping malls.

The reason why high fees occur when using the payment service is that structurally, 4 to 5 intermediate participating companies in one payment process divide and process various tasks such as authentication, settlement, settlement, and payment for payment.