Research on the Effects of the Credit Card Industry on the Korean Economy
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Research on the Effects of the
Credit Card Industry
on the Korean Economy
This report is a joint report published
by Samil PwC and KAIST Graduate
School of Management's Professor
Namgyoo Park (and team),
comissioned by Visa International
Asia Pacific.
Visa and the authors acknowledge the
assistance provided by the Credit Finance
Association (CREFIA) in the preparation of
this report
April, 2006
Table of Contents
Welcome 2
Executive Summary 3
1. Research Background 6
2. Effects of the Credit Card Industry on the Korean Economy 10
2-1. Enhanced Transaction Transparencies 11
through Credit Card Usage
2-2. Increased Tax Revenue 13
through Credit Card Usage
2-3. Increase in Deposits of Financial Institutions 17
through Credit Card Usage
2-4. Development of Directly and Indirectly Related Industries 20
through the Credit Card Industry
3. Conclusion Contributions to GDP 27
4. Appendix 31
5. References 37
welcome 2
Welcome
The payments industry in Korea has come a long way in a relatively short time. It has transformed
the way Koreans buy and sell goods and services. The existence of a sophisticated and flexible
payments system has also been a key factor underpinning Koreas strong economic performance
in recent years. By supporting consumer spending it has fueled domestic growth, and by allowing
for easy travel by Koreans overseas and foreign visitors to Korea it has boosted tourism and
international commerce.
Through the operations of Visa, its members and technology partners, Korea has established an
electronic payments system that leads the world in technological innovation. Koreas domestic
system is especially highly advanced in the use of contactless and chip cards, and the leader in
mobile payment. Furthermore, Korean companies are now successfully exporting these technologies
to many other countries.
Despite the remarkable progress, some have voiced criticism of the Korean credit card industry,
claiming that widespread use of payment cards has led to over consumption and negative
economic impacts. This report strives to shed new light on such negative perceptions by
investigating the Korean credit card industry both statistically and qualitatively.
This report is a contribution by Visa to the Korean credit card industry; revealing not only an
economic infrastructure that has contributed to the significant increase in transaction transparency,
tax revenue, and deposits, but is also a driving force that accelerates the development of directly
and indirectly related industries. Moreover, the Korean Governments policy of fostering credit
card usage and the experience of the Korean credit card industry could be considered a meaningful
case study for other countries. The credit card industry, combined with the recent establishment
of the Credit Bureau, is expected to play an essential role in advancing the Korean financial sector
as well as developing the national economy.
This report was prepared to review and assess positive aspects in promoting widespread usage
of cards by consumers. As a result, this report is not intended to present potential risk in identifying
and solving potential adverse impact on respective risk of various kinds. Potential risk should be
assessed to minimize the risk of the industry and each country before introducing similar practices.
We hope that this report may help eliminate the negative perception of the Korean credit card
industry and further contribute to the establishment of a desirable culture of consumption and
payment transactions.
We look forward to playing our full part in the discussions that lie ahead.
Young Chong Kim
Country Manager Korea
Visa International
executive summary 3 Executive Summary
executive summary 4
In 2004, the Korean credit card industry recorded 358 trillion KRW in credit card spending
and 20.4 billion credit card transactions, becoming the largest in the Asia-pacific region, and
comparable in size to those in major developed countries. This research demonstrates some
positive contributions the Korean credit card industry has made to Koreas sound economic
development. This research shows that the Korean credit card industry generated a 21.5 trillion
KRW worth of value for the national economy in 2002 when it reached its peak. It also
contributed to the significant increases in transaction transparency, tax revenue, and deposits.
Furthermore, it accelerated the development of directly and indirectly related industries,
establishing a foundation for a new era in the Korean financial sector.
Enhanced Transaction Transparency Increased Tax Revenue through Credit
through Credit Card Usage Card Usage
In order to examine whether the This study examines whether the
development and expansion of the credit development and expansion of the credit
card industry promotes transaction card industry decreases the potential to
transparency, revenue data was collected under-report revenue, which eventually
from 54 merchants in four sectors: contributes to increases in tax revenue. In
educational academies, hospitals, gas order to investigate the above
stations, and restaurants. These sectors relationships, this study collected data on
were selected because they have high value added tax payments and total credit
potential to under-report revenue, due to card spend in the restaurant, retail, and
the fact that a high proportion of their service sectors from 1990 to 2003.
revenue is paid in cash. The ratio of credit Statistical analysis shows that credit card
card payments over total revenue has spend significantly increased value added
increased steadily since 2000, which tax payment in these sectors. Specifically,
ultimately decreased the potential to a 1% increase in credit card spend leads
under-report revenues in those sectors. to a corresponding increase in value added
tax of up to 1.56%. These empirical
This study also investigates whether findings show that credit card usage
Korean firms increased credit card spend contributes to an increase in tax revenue
for their entertainment expense payments in the national economy. Thus, the credit
after the introduction of the government card industry provides a foundation for
policies to promote credit card usage. the sound development of the national
Detailed expense data were collected from economy.
40 companies from 1995 to 2004. The
results show that the proportion of credit
card usage for entertainment expenses
continuously increased from 1995 to 2003,
which subsequently increased the ratio of
credit card spend over total revenue in the
various sectors in Korea; including bars,
restaurants, and golf clubs. Thus, this study
verifies that the credit card industry has
enhanced transparency in corporate
entertainment expenses. In consequence,
it increased transparencies of the reported
revenues in those sectors.
executive summary 5
Increase in Deposits of Financial Development of Directly and Indirectly
Institutions through Credit Card Usage Related Industries through the Credit
Card Industry
In order to study whether the propagation
of the credit card industry can increase This research analyzed primary and
the deposits of various financial secondary data to examine the impact of
institutions, this report, using quarterly the credit card usage on various directly
data from 1994 to 2004, analyzed the and indirectly related industries. The
relationships between the currency index, results show that an increase in credit
credit card purchases and cash advance card usage has made possible the fast
usage. The empirical findings show that growth and rapid activation of various
credit card usage significantly increased directly related industries; including VANs
deposits of non-monetary banks while (Value Added Networks), POS (Point of
cash advance usage did not. From the Sale) terminal manufacturers, PGs
statistical perspective, an increase of 1% (Payment Gateways), and Public Key
in credit card purchases led to a 0.13% Infrastructure services. The total net value
increase in deposits. Such results show added created by firms participating in
that an increase in credit card usage the card market is estimated at 21.19
decreases individuals need for cash, trillion KRW in 2002. In addition, the total
leading to a subsequent increase in the revenue of these directly related industries
amounts on deposit. In terms of the had grown from 36.3 billion KRW in 1998
national economy, this research shows to 358 billion KRW in 2002.
that the declining need of various
economic entities for cash will eventually Indirectly related industries such as e-
increase the amount on deposit in financial commerce, leisure & travel, and
institutions, which could enhance liquidity entertainment are also experiencing
in the national economy and further foster continuing growth due to the convenient
economic growth and development. purchasing process which credit cards and
other value added services allow. It is very
challenging to quantify the economic value
added by such indirectly related industries.
However, from the data collected, we can
see that Koreas credit card industry
significantly contributed to the growth of
these indirectly related industries.
research background 6 Research Background
research background 7
While credit cards were first introduced Credit Card Spend
- Major Asia-Pacific Nations
to the United States in 1950, they were 250
not introduced to Korea until the 1970s
Credit card spend (US$ in billion)
and even then they were only available to 200
certain wealthy classes of people. The
The Korean Credit Card Business Act of 1987 provided
150
government policies a foundation for the regulation and 100
to promote credit development of the Korean credit card
card usage since industry. Samsung Card Co., Ltd and LG 50
Card Co., Ltd were the first to offer cards
1995 triggered the
under the new system beginning in 1988, 0
explosive growth of and thereafter the Korean credit card
96
97
98
99
00
01
02
03
04
19
19
19
19
20
20
20
20
20
the Korean credit industry has made remarkable progress Korea Australia
Hong Kong Singapore
card industry both qualitatively and quantitatively.
Total Number of Credit Card Transactions
As shown in [Figure 1], current annual 25
- Major Asia-Pacific Nations
credit card spend in Korea amounts to
US$201.1 billion (230 trillion KRW, 20
Number of transactions
excluding cash advances), which is
(hundred thousands)
considerably higher than other Asia Pacific 15
markets such as Australias US$ 92.6
10
billion, and Hong Kongs US$17.7 billion.
In addition, in terms of the total number 5
of transactions, Korea registered 2 billion
transactions compared to just 950 million 0
in Australia and 17 million in Hong Kong. 2002 2003 2004
Korea Australia
Considering the total GDP and total
Hong Kong Singapore
population, these facts clearly show that
[Figure 1] Credit card spend and number of credit card
Koreas credit card industry has made transactions of major Asia-Pacific Nations
much more significant progress both in (Source: Visa International, Korea Credit Finance Association)1
size and speed than in other Asia-Pacific
nation.
1Credit card spend does not include the total amount of cash advance,
and the amount has been converted into US$ denominations using the
average annual foreign currency exchange rate between KRW and US$.
research background 8
Korean government policies to promote 700
credit card usage since 1995 [Table 1], 600
Credit card spend(trillion KRW)
combined with the aggressive marketing 500
activities of the Korean credit card
400
companies, increased total credit card
300
spend (which was about 43 trillion KRW
excluding cash advances in 1999) by an 200
average annual growth rate of almost 90% 100
from 1999 to 2002 [Figure 2]. This growth 0
trend was also evident in cash advances,
96
97
98
99
00
01
02
03
04
lump sum payments, and installment
19
19
19
19
20
20
20
20
20
Lump-sum Installment Cash advance
payments.
[Figure 2] Historical trend of credit card spend in Korea
[1996~2004]
(Source: Korea Credit Finance Association)
Major Policies \ Year ~ 1994 1995 ~ 1998 1999 ~
Restrictions on the
maximum proportion of Within Within Within
revenues from cash 60% 50% 50%
advance
Limits on cash advances Restrictions Re-
Restrictions
amount for individuals abolished introduction
Restrictions on Restriction
No No
recruitment methods of on street
restrictions restrictions
new credit card members promotions
Ratio of mandatory credit
Reinforced,
card usage on corporate
Implemented Reinforced abolished in
entertainment expenses
2002
(for more detail, see Table 2)
VAT credit for credit card
spend (1% rebate of the total Implemented Sustained Increased
VAT payments for merchants)
Income deductions for
credit card spend
(Income deduction for 10% of - - Implemented
total credit card spend that
exceed 10% of annual income)
Mandatory credit card usage
on entertainment expense - - Implemented
exceeding 50,000 KRW
Using credit card receipts
as lottery tickets
(Monthly drawing with the - - Implemented
1st prize money of 1000
million KRW)
[Table 1] Major Korean government policies related to the credit card industry
research background 9
However, the rapid expansion in cash Therefore, this research strives to analyze
advances and card loan services by most both objectively and systematically the
Korean credit card companies increased effects of the credit card industry on the
the delinquency rate in the Korean Korean national economy. More
financial system, producing more than 2 specifically, this research examines the
The so-called credit million credit defaulters since 2002. This contributions of the credit card industry
card crisis of 2002 economy-wide phenomenon gave birth to to GDP growth, transaction transparency,
intensified negative the term Credit Card Crisis and some increases in tax revenue, increases in
perceptions about credit card companies had to rely on public deposits, and development of directly and
funds to sustain their operations. indirectly related industries.
the credit card
industry 900 300
800 Korean National
Credit card spend(Trillions in Won)
250 Economy
700
GDP (trillion KRW)
600 200
500
150 Contribution to GDP
400
300 100
Improvement Increase in Increase in Development
200
50 in Transaction Tax Deposits of of Directly
100 Transparency Revenue Financial and Indirectly
0 0 Institutions Related
Industries
98
00
01
04
96
02
03
99
97
19
20
20
20
19
20
20
19
19
GDP Credit card spend
Development & Expansion of the
[Figure 3] Historical trend of GDP and credit card spend Credit Card Industry
(Source: Bank of Korea, Korea Credit Finance Association)2
This so-called Credit Card Crisis was a [Figure 4] Effects of the credit card industry on national
economy
temporary phenomenon caused by
excessive competition between credit card
firms and the very rapid development and
expansion of the government policy on
credit card usage. In particular, as shown
in [Figure 3], from 1999 to 2002, credit
card spend has significantly exceeded the
GDP growth rate. As the domestic credit
card industry begins to stabilize its
operations and competitive activities,
objective investigation of the various
contributions of the credit card industry
to the Korean national economy is
worthwhile.
2The total amount of credit card spend does not
include cash advances and credit card loan services.effects of the credit card on the Korean industry 10 Effects of the Credit Card Industry on the Korean Economy
effects of the credit card on the Korean industry 11
2.1 Enhanced Transaction Transparency Economic transparency, in general, may
through Credit Card Usage be enhanced by the advancement of
financial institutions and systems as well
A strong underground economy generally as stronger reinforcement of government
inhibits the sound growth of a nations inspections and regulations. The
The use of credit development of the credit card industry,
economy, weakens the foundation of
cards increases taxable income, and makes economic as part of the financial system
transparency in predictions and planning challenging. development, can also play a major role
economic activities Hence most countries make various in promoting economic transparency. This
attempts to foster economic transparency section analyzes the extent to which the
by minimizing the size of underground Korean credit card industry has affected
economies. the transaction transparency of
corporations and sole proprietors.
As shown in [Figure 5], LG Economic
Research Institute (LGERI) estimates that Revenues are obvious performance
the Korean underground economy had indicators for both corporations and sole
increased to approximately 50 trillion proprietors, which become the basis of
KRW by 2000. However, the proportion income taxes. In order to examine whether
of the underground economy compared the development and expansion of the
to the total GDP, which amounted to credit card industry promotes transaction
For both 27.7% in the 70s, has steadily declined. transparency among economic bodies,
corporations and These trends show that there has been a this research collected revenue data from
merchants, the general increase in economic transparency 54 merchants in four sectors: educational
in Korea during the last few decades. academies, hospitals, gas stations, and
proportion of credit restaurants. This study tracked their total
card sales in total 140 35%
sales from 2000 to 2004 and analyzed
Underground economy as a % of GDP
sales is the change in percentage of credit card
Size of the underground economy
120 30%
continuously 100 25% sales.
(billion USD)
increasing 80 20%
60 15%
40 10%
20 5%
0 0%
4
9
4
9
2
7
9
3
~7
~7
~8
~8
~9
~9
~9
~0
70
74
80
85
90
93
98
00
19
19
19
19
19
19
19
20
Estimated underground economy
Underground economy as a % of GDP
[Figure 5] Estimated size of Koreas underground economy
(Source: LG Weekly Economy 2001.04.25, LG Economic
Research Institute)effects of the credit card on the Korean industry 12
70%
Unlike other corporate expenses,
58%
60% 57% 57%
entertainment expenses have been
50%
typically perceived as being the most
Percentage of Revenue
Credit Card Sales as a
50%
43% 42%
40% 37%
41% 41%
difficult in terms of enforcing transparency
since the nature of the transaction itself
Credit card use for
31%
30%
makes it challenging to keep clean records.
corporate 20%
Therefore, corporate entertainment
entertainment 10% 5%
8% 8% 9% 9%
expenses have contributed heavily to the
expenses is 0% expansion of the underground economy.
2000 2001 2002 2003 2004 In order to alleviate this situation, the
continuously Hospital sector Non-hospital sector Korean government adopted and
increasing Total
reinforced a policy wherein the use of
[Figure 6] Historical trends in credit card sales as a percentage
of revenue for sole proprietors credit cards is mandatory when paying for
(Source: Tax return of sampled merchants) entertainment expenses exceeding a
certain amount [Table 2].
[Figure 63] shows the change in revenue
for sole proprietors and the percentage of
credit card sales with respect to total sales. In 1991, the Korean government introduced
We investigate these sectors because they a mandatory credit card usage policy on
corporate entertainment expenses (For
are traditionally well known for high
large firms, 40% of their entertainment
potential to under-report their sales. The expenses should be paid by credit cards
figure shows that the percentage of credit and for small and medium firms, 30%)
card sales has steadily increased from
In 1995, the Korean government increased
31% in 2000 to 42% in 2004. The non- the ratio to 75% for firms in Seoul, 60%
hospital sector, in particular, experienced for those in metropolitan cities, 40% for
a similarly rapid growth of credit card sales those in other cities
from 43% in 2000 to 58% in 2004. While In 1999, the Korean government introduced
we could find very similar patterns of a mandatory credit card usage policy on
change in educational academies, gas corporate entertainment expense
stations, and restaurants, the hospital exceeding the amount of 50,000 KRW. If
sector has shown an exceptionally low the requirement is not met, there will be
no expense benefits. The Korean
proportion of credit card sales. Unlike government again increased the ratio to
other sectors, most of the payments in 80% for firms in Seoul, 70% for those in
the hospital sector are petty payments metropolitan cities, 60% for those in large
because most medical expenses are cities, and 50% for those in other areas
covered by insurance. Due to the nature In 2002, the Korean government sustained
of these transactions, the percentage of the mandatory credit card usage policy on
credit card sales is comparatively small corporate entertainment expenses
but it is nevertheless increasing at a steady exceeding the amount of 50,000 KRW but
repealed the mandatory ratios
pace. An increase in credit card usage may
signify that sole proprietors will have fewer
[Table 2] Major Korean government policies related payments
opportunities to deliberately under-report of corporate entertainment expenses
their sales. In summary, the increase in
credit card sales will make the process of
tampering sales data more difficult and
subsequently decrease the size of the
underground economy, promoting
economic transparency in Korea.
3The Korean government introduced various policies to promote credit card use during
1998~1999, especially after the Korean financial crisis. We cannot confirm whether
the credit card usage ratio was very low during the early stages of the policy introduction.
This is because the record keeping for most merchants are usually limited to the
maximum of 5 years. Thus, we investigated data from 2000 to 2004 only.effects of the credit card on the Korean industry 13
0.50% 90%
2.2 Increases in Tax Revenue through
0.45% 80%
Credit Card Usage
Entertainment expense as a %
0.40% 70%
% of credit card spend in
0.35%
60%
This section investigates how the Korean
entertainment
0.30%
of revenue
50%
0.25%
40%
government policies for the credit card
0.20%
30%
industry affect changes in tax revenue.
0.15%
20%
Due to the fact that there are a number
0.10%
0.05% 10%
of sources that determine total tax
0.00% 0%
revenue, factors that had little direct
relationship with credit card usage, such
95
97
03
99
01
19
19
20
19
20
Entertainment expense as a % of revenue
as corporate income tax and direct tax,
% of credit card spend in entertainment expense were not included in the analysis. However,
[Figure 7] Historical trends showing % of credit card spend value added tax (VAT) is predicted to
in entertaiment expense and entertainment expense as a %
of revenue
show the most sensitivity to changes in
(Source: Financial statements and tax returns for sampled accurate recording of sales. As VAT is an
corporations)
indirect tax, with minimum tax revolts and
comparatively low risk involved with
Detailed expense data was collected from
collection, the impact of credit card usage
a random sample of 40 companies from
on the increase in tax revenue can be
1995 to 2004. Our analysis revealed that
demonstrated more effectively. This
the amount of entertainment expenses
section empirically investigates whether
with respect to total sales has been
the development and expansion of the
gradually decreasing since 1995. At the
credit card industry eventually contributes
s a m e t i m e , t h e p e rc e n t a g e o f
to an increase in tax revenue. This study
entertainment expenses paid by credit
collected data on VAT payments and total
card has been on a steady increase,
credit card spend in the restaurant, retail,
exceeding 80% by the year 2003. Such
and service sectors from 1990 to 2003
trends indicate that the expansion of the
where credit card payment can be
credit card industry, accelerated by the
expected to constitute a high proportion
Korean government policy of mandatory
of total sales.
credit card usage, has enhanced economic
transparency over the last decade. These
Since the scale of the indirect tax change
findings are also statistically valid (t-test:
is affected not only by credit card spend
significance level of 95%).
but also by the overall economic trends,
our statistical analysis incorporated both
Due to the nature of the underground
credit card spend and GDP growth rate
economy, it is very difficult to measure its
when analyzing their impacts on VAT
overall magnitude and to cover all
payment.
individual activities. However, the increase
in credit card usage is leading to enhanced
transaction transparency in corporations.
Moreover, credit card payments made to
sole proprietors can also be seen as a
factor that contributed to reducing the
size of the underground economy.effects of the credit card on the Korean industry 14
2.0 As shown in [Figure 8], VAT payments in
the restaurant sector are more affected
1.5 by changes in credit card spend than GDP.
Statistical analysis shows that while
changes in GDP were not significant, credit
1% increase in 1.0
card spend significantly increased VAT
credit card spend payment in this sector. Specifically, we
0.5
increased VAT found that a 1% increase in credit card
payments up to spend will increase VAT payments by
0.0
0.05% to 1.56% in the restaurant sector
1.56% in the
90
91
92
93
94
95
96
97
98
99
00
01
02
03
(Significance level: 95%). These findings
19
19
19
19
19
19
19
19
19
19
20
20
20
20
restaurant sector -0.5 GDP growth rate imply that the government policy of
Growth rate of credit card spend
Growth rate in VAT payments in the
promoting the credit card industry made
restaurant sector most revenues of this sector exposable to
the tax collection system.
Growth rates in VAT payments in the restaurant sector
and credit card spend
Growth rate of VAT payments in the
1.6
restaurant sector
1.1
0.6
0.1
-0.4
-0.4 0.1 0.6 1.1 1.6
Growth rate of credit card spend
Growth rates in VAT payments in the
restaurant sector and GDP
2.0
Growth rate of VAT payments in
1.5
the restaurant sector
1.0
0.5
0.0
-0.5
-0.10 -0.05 0.00 0.05 0.10
GDP growth rate
[Figure 8] Relationships between growth rates of GDP,
credit card spend and VAT payments in the restaurant
sector
(Source: KAIST analysis, Bank of Korea, Yearly report on
national tax statistics)effects of the credit card on the Korean industry 15
1.4 The VAT payments made by small retailers
1.2 show similar patterns to that of credit card
1.0 spend. Statistical analysis shows that
credit card spend significantly increased
0.8
VAT payment in this sector. Specifically,
1% increase in 0.6
while changes in GDP were not significant,
credit card spend 0.4 a 1% increase in credit card spend has
increased VAT 0.2 increased VAT payment in the retail sector
payments up to 0.0
by 0.07 to 0.50% (Significance level:
95%). Hence, these findings show that
0.50% in the
90
91
92
93
94
95
96
97
98
99
00
01
02
03
-0.2
the government policy of promoting the
19
19
19
19
19
19
19
19
19
19
20
20
20
20
retail sector -0.4 GDP growth rate credit card industry increased VAT
Growth rate of credit card spend
Growth rate of VAT payments in the retail sector payments in the small retail sector.
Growth rates in VAT payments in the retail
sector and credit card spend
0.5
Growth rate of VAT payments in the
0.4
retail sector
0.3
0.2
0.1
0
-0.4 0.1 0.6 1.1 1.6
Growth rate of credit card spend
Growth rates in VAT payments in
the retail sector and GDP
0.5
Growth rate of VAT payments in the
0.4
0.3
retail sector
0.2
0.1
0.0
-0.10 -0.05 0.00 0.05 0.10
GDP growth rate
[Figure 9] Relationships between GDP growth rates, credit
card spend and VAT payment in the retail sector
(Source: KAIST analysis, Bank of Korea, Yearly report on
national tax statistics)effects of the credit card on the Korean industry 16
1.4 As shown in [Figure 10], VAT payments
1.2 in the service sector very much resemble
1.0 patterns of change of the GDP and credit
card spend. Our statistical analyses show
0.8
that a 1% increase in GDP increases VAT
1% increase in 0.6 payments in the service sector by 0.45%
credit card spend 0.4 to 4.06% (Significance level: 95%), and
increased VAT 0.2 a 1% increase in credit card spend
payments up to increases VAT payments by -0.04% to
0.0
0.40% (Significance level: 95%4). These
0.40% in the
90
91
92
93
94
95
96
97
98
99
00
01
02
03
-0.2 findings also reveal that the government
19
19
19
19
19
19
19
19
19
19
20
20
20
20
service sector -0.4 GDP growth rate policy of promoting the credit card
Growth rate of credit card spend
Growth rate of VAT payments in industry increased VAT payments in the
the service sector service sector.
Growth rates in VAT payments in the
service sector and credit card spend In conclusion, our statistical analyses show
0.6
that a 1% increase in credit card spend
0.5
Growth rate of VAT payments in the
increases VAT payments up to 1.56% in
0.4
the restaurant sector, 0.50% in the small
0.3 retail sector, and 0.40% in the service
service sector
0.2 sector. These findings demonstrate that
0.1 the development and expansion of the
0.0 credit card industry increases VAT
-0.1 payment and eventually increases the
-0.2 Korean national tax revenue.
-0.4 0.1 0.6 1.1 1.6
Growth rate of credit card spend
Growth rates in VAT payments
in the service sector and GDP
0.6
Growth rate of VAT payments in the
0.5
0.4
0.3
service sector
0.2
0.1
0.0
-0.1
-0.2
-0.10 -0.05 0.00 0.05 0.10
GDP growth rate
[Figure 10] Relationships between growth rates of GDP, credit
card spend and VAT payment in the service sector
(Source: KAIST analysis, Bank of Korea, Yearly report on
national tax statistics)
4Significant at 90% significance level (see appendix)effects of the credit card on the Korean industry 17
2.3 Increase in Deposits with Financial [Figure 11] shows the correlations between
Institutions through Credit Card Usage cash currency, credit card spend, and cash
advance. We conducted regression
Although the propagation of credit card analyses to examine how credit card spend
use may not change the total amount of and cash advance affects cash currency.
1% increase in cash According to the results, a 1% increase in
cash in the economy, it may reduce the
advance increases need to keep cash for transactions and/or cash advance increased cash currency by
cash currency but precautionary motives, decreasing the 0.02~0.11% (Significance level: 95%) but
increase in credit card demand for money. In this case, the increase in credit card spend did not have
proportion of cash in circulation will a significant influence on cash currency.
spend didnt have a
decrease while the proportion of deposit
significant influence currency will increase. These processes
2.5
on cash currency are expected to eventually increase 2.0
deposits in financial institutions. As of 1.5
2004, Koreas M35 amounted to 1,286 1.0
trillion KRW, of which cash currency and
0.5
bank deposits amounted to approximately
0.0
500 trillion KRW while deposits held by
non-bank depository institutions (demand
93
94
95
96
97
98
99
00
01
02
03
04
05
-0.5
19
19
19
19
19
19
19
20
20
20
20
20
20
deposits, savings account, deposits of -1.0 Growth rate of credit card spend
mutual savings banks, deposits, deposits Growth rate of cash currency
Growth rate of cash advance
in foreign currency, money in trust,
deposits of Korean securities finance Growth rates in cash advance amount
corporation, etc.) exceeded 600 trillion 0.5
and cash currency
KRW. In particular, deposits held by non-
0.4
bank depository institutions occupy the
Growth rate of cash currency
largest proportion of M3 currency, have 0.3
a comparatively lower liquidity, and
0.2
provide more opportunities for investment.
This section therefore analyzed the effects 0.1
of credit card spend on cash currency,
0
demand deposits, and deposits of non-
bank depository institutions6. -0.1
-1 -0.5 0 0.5 1 1.5 2 2.5
Growth rate of cash advance amount
Growth rates of credit card spend and
0.6 cash currency
Growth rate of cash currency
0.4
0.2
0
-0.5 0 0.5 1 1.5
-0.2
Growth rate of credit card spend
[Figure 11] Relationships between growth rates in credit
card spend, cash advance amount and cash currency
5The currency index in Korea has the three different categorizations, specifically M1, M2, and M3. M1 (Source: KAIST analysis, Bank of Korea, Korea Credit
Finance Association)
includes cash and demand deposits. M2 includes M1 and savings accounts. M3 is the most comprehensive
of the three. M3 includes M2, financial bank debentures, deposits of non-bank depository institutions,
and certificates of deposits.
6During the research period, the interest rate (prime corporate bond rate with 3 year maturity) continuously
decreased from 12.42% in the first quarter of 1993 to 3.87% in the fourth quarter of 2004. While the rate
increased significantly during the end of 1997 till the beginning of 1998, it moved to the opposite direction
compared to other macro economic variables. Thus, during our research period, it is not reasonable to
assume that high interest rates will increase deposits. Therefore, in our research, we did not consider
interest rate variables when we analyzed changes in cash, demand deposit, and derivative money.effects of the credit card on the Korean industry 18
The relationship between demand 2.5
deposits held by banks and variables 2.0
related to credit card spend are shown in 1.5
[Figure 12]. Cash advances seem to
1.0
influence demand deposits more than
Credit card spend credit card spend. In order to further 0.5
and cash advances examine these multidimensional 0.0
have no significant relationships, we conducted regression
93
94
95
96
97
98
99
00
01
02
03
04
05
-0.5
19
19
19
19
19
19
19
20
20
20
20
20
20
impact on demand analyses. The findings show that demand
-1.0 Growth rate of credit card spend
deposits arent significantly influenced by
deposits of banks Growth rate of demand deposits
both credit card spend and cash advances Growth rate of cash advance
in general. Growth rate in cash advance amount
and demand deposits
0.8
0.6
Growth rate of demand deposits
0.4
0.2
0
-0.2
-0.4
-0.6
-0.5 0 0.5 1 1.5
Growth rate of cash advance
Growth rate in credit card spend and
demand deposits
0.8
0.6
Growth rate of demand deposits
0.4
0.2
0
-0.2
-0.4
-0.6
-0.5 0 0.5 1 1.5
Growth rate of credit card spend
[Figure 12] Relationships between growth rates in credit
card spend, cash advance and demand deposits
(Source: KAIST analysis, Bank of Korea, Korea Credit
Finance Association)effects of the credit card on the Korean industry 19
Finally, we examined how changes in cash 2.5
advances and credit card spend affected 2.0
deposits with non-bank depository 1.5
institutions [Figure 13]. Results from the
1.0
regression analyses show that a 1%
1% increase in credit increase in credit card spend increased 0.5
card spend deposits in non-bank depository 0.0
increased deposits institutions by 0.00~0.13% while a 1%
93
94
95
96
97
98
99
00
01
02
03
04
05
-0.5
19
19
19
19
19
19
19
20
20
20
20
20
20
with non-bank increase in cash advances decreased
-1.0 Growth rate of credit card spend
deposits in non-bank depository
depository by Growth rate of demand deposits in
institutions by 0.06~0.15% (Significance non-monetary banks
0.13%, but 1% level: 95%).
Growth rate of cash advance
increase in cash Growth rates in cash advance and
deposits in non-monetary banks
advance decreased All the above results provide the following 0.3
deposits with non- key findings: 0.25
0.2
Growth rate of deposits in
bank depository by Increases in credit card spend do not
non-monetary banks
0.15
0.15% significantly influence cash currency, 0.1
nor demand deposits, but influence the 0.05
increase in deposits in non-bank 0
depository institutions -0.05
Increases in cash advances cause an -0.1
increase in cash currency, but have a -0.15
-1 -0.5 0 0.5 1 1.5 2 2.5
tendency to decrease deposits in non-
Growth rate of cash advance
bank depository institutions
Growth rates in credit card spend and
The phenomenon of increased deposits deposits in non-monetary banks
0.3
due to increases in credit card spend
0.25
further generates derivative money,
0.2
subsequently provides the necessary
Growth rate of deposits in
non-monetary banks
0.15
liquidity for the national economy, and
0.1
eventually promotes economic
0.05
activities
0
-0.05
-0.1
-0.15
-0.5 0 0.5 1 1.5
Growth rate of credit card spend
[Figure 13] Relationships between growth rates in credit
card spend, cash advance and deposits in non-monetary
banks
(Source: KAIST analysis, Bank of Korea, Korea Credit
Finance Association)effects of the credit card on the Korean industry 20
2.4 Development of Directly and 3-2. Wiring of 3-1. Wiring of
Approval Approval
Indirectly Related Industries through
the Credit Card Industry Card- Merchant Van
Credit
Card
holder or PG Operators Company
The development of The rapid growth of the Korean credit card 1. Purchase 2-1. Authorization 2-2. Authorization
Request Request
the credit card industry since 1995 affected not only the
4-1. Transfer of
credit card industry but also had Van Service Fee
industry may help widespread impacts on directly and
Bank
Account
Bank
Account
Bank
Account
Bank
Account
growth of directly indirectly related industries. In addition to
and indirectly the firms that engage in the credit card 4-2. Transfer of Purchase Amount (net of fee)
related industries transaction process, various other 5. Payment or Transfer of Purchase Amount
industries such as retail, electronic Transaction Flow
commerce, and travel and leisure are Money Flow (Flow of Economic Value)
closely related to the credit card industry.
This section examines the effects of the [Figure 14] Credit card transaction process purchases
(Source: Korea Credit Finance Association)
credit card industry on directly and
indirectly related industries. [Figure 15] illustrates a typical cash
advance process. When a customer
2.4.1 Transactions Processes Using Credit requests cash service through Automated
Cards Teller Machines (ATM), an approval
request is typically forwarded to credit
In order to better comprehend industries card companies through the Interbank
directly related to the credit card industry, Shared Network. Cash advances depend
we provide detailed illustration of the on the result of the authorization request.
credit card transaction processes for both
credit purchases and cash advances. 3-2. Transfer 3-1. Transfer
[Figure 14] illustrates the typical of Approval of Approval
transaction processes for payments made Card- ATM Inter-bank Credit
Shared Card
at stores using credit cards. In this credit holder Terminal
Network Company
purchasing process, as soon as customers 1. Cash 2-1. Authorization 2-2. Authorization
make a purchase at a store, POS terminals Withdrawal Request Request
send transaction information to Value 4-1. Network
Service Fee
Added Network (VAN) service providers. Bank Shared Network Bank
Account Account Account
In the case of small e-commerce
businesses, the transaction information
5. Payment (Payment + Interest + Fee)
is sent to the VAN usually through the
Payment Gateway (PG) service providers.
VAN service providers transmit requests Transaction Flow
Money Flow (Flow of Economic Value)
for transaction approval from merchants
to credit card companies and the [Figure 15] Credit card transaction process cash advance
authorization information back to the (Source: Korea Credit Finance Association)
merchants to complete the transaction.effects of the credit card on the Korean industry 21
2.4.2 Directly Related Industries As seen in [Figure 16], the growth of the
VAN service sector has been directly
Activities creating economic value in the
affected by the total amount of credit card
credit card transaction process itself are
spend (excluding cash service). According
the following:
to the Korean Association of Information
With the growth of Provision of VAN service and Communication (KAIT), total revenue
the credit card for the whole industry was a mere 26
Provision of PG service
industry, the VAN billion KRW in 1998 but increased to 214
Manufacturing and installment of POS billion KRW in 2003.
service sector grew
terminals
to a 214 billion KRW
Provision of money remittance service Competition in VAN services has
market intensified recently, but profitability
between banks
stabilized due to the Mutual agreement
Provision of Public Key Infrastructure to establish a market environment for fair
(PKI) for e- commerce competition in November 2003.
Furthermore, with the introduction of
This chapter aims to analyze the effects alternative payment methods such as
of the credit card industry on each of the mobile payments or smart cards, the
directly related industries. single service market for credit card inquiry
was restructured as a compounded service
market, creating greater room for further
VAN Service Providers
growth.
The VAN service providers connect credit
card companies and POS terminals at 300 250
merchants to relay requests for credit
VAN service revenue (billion KRW)
250
Credit card spend (trillion KRW)
200
purchase authorizations and the
200
subsequent authorization results. 150
Commissions resulting from such 150
authorization relay services are one of the 100
100
main revenue sources for VANs. VAN
50
services were privatized in 1987 by Korea 50
Information & Communications Co., Ltd
0 0
(KICC) after the full-scale deployment of 98 99 00 01 02 03
the credit card business. Currently KICC, VAN service revenue
Credit card spend
KS NET Inc., Korea Mobile Payment
Services Co., Ltd (KMPS), and KISVAN [Figure 16] Credit card spend and VAN service revenue
(Source: Korea Credit Finance Association, Korea
Inc. are the major players, and they Association of Information and Telecommunication)
account for over 80% of market share.effects of the credit card on the Korean industry 22
Manufacturing and Sales of POS Terminals 1996 2003
The credit card POS terminal, a necessary
USA
component of credit card transactions, is
Number of credit card usage per person
manufactured and sold by companies such USA
With the growth of as HANCHANG Systems Corp., KICC, and
the credit card National Information & Credit Evaluation, Korea
50 UK
Inc. (NICE). As shown in [Figure 17],
industry, the sales of revenues of the industry leaders increased
these sectors at an average rate of 70% until 2002,
JPN UK
increased to 80 spurred by the rapid increase in credit JPN
GER
billion KRW at its card usage. Although revenue has been Korea
GER
decreasing since reaching its peak of 78.2
peak 40,000 64,092
billion KRW in 2002, future growth is POS Terminal (per million people)
anticipated due to the increase in exports
[Figure 18] POS terminal installation and credit card usage
to Japan, China, and the Middle East. Such (Source: Korea Financial Telecommunications and Clearings Institute)
rapid growth of the POS terminal sector
led by the growth of the credit card According to the statistical analysis of the
industry is expected to contribute to POS terminal manufacturing sector
obtaining foreign currency and improving conducted by the Korea Financial
the trade balance. Telecommunications & Clearings Institute
(KFTC), the number of POS terminals
300 90 deployed per million people increased
80 from 14,945 in 1996 to 64,092 in 2003,
Sales of POS terminals (billion KRW)
Credit card spend (trillion KRW)
250
70 exceeding that of all major developed
200 60 countries. In addition, the frequency of
150
50 credit card usage exceeded 50
40 transactions per person, placing Korea in
100 30 second place right behind the U.S.
20
50
10
0 0
1998 1999 2000 2001 2002 2003 2004
Sales of POS terminals
Credit card spend
[Figure 17] Credit card spend and sales of POS terminals
(Source: Korea Credit Finance Association, Annual
report & auditors report of POS terminal manufacturing
companies)7
7We collected revenue data of POS terminals from audit reports and/or
business reports for seven companies including HANCHANG Systems
Corp, KICC, and NICE.effects of the credit card on the Korean industry 23
Payment Gateway (PG) Service Providers Other Directly Related Industries
300 80 PKI is an electronic signature used for
70 personal identification purposes and
PG service revenue(billion KRW)
250
Credit card spend(trillion KRW)
60 functions as the equivalent to a legal seal
200
With the growth 50 in offline transactions. To deal with the
of credit card and 150 40 safety issues in typical online financial
transactions, more and more financial
e-commerce 100
30
institutions are mandating the use of PKIs.
20
industries, the 50 Currently, PKI institutions authorized by
10
sales of this sector 0 0
the government include KFTC, Korea
increased to 75 1999 2000 2001 2002 2003 2004 Information Certificate Authority Inc.,
Koscom Corp., Korea Electronic
billion KRW PG service revenue
Credit card spend Certification Authority Inc., National
[Figure 19] Credit card spend and PG service revenue Computerization Agency, and Korea Trade
(Source: Hana Economic Research Institute,
Korea Information Service Corp, Annual Network. Since the policy to charge the
and auditors report of PG service companies)8 issuing of PKI came into effect in
September 2004, 803,000 PKIs have
PG service is a proxy for credit card been issued as of July 2005. Considering
transactions of small-size e-commerce the cost of 4,400 KRW per PKI issuance,
companies. Similar to the transactions for this amounts to 3.5 million KRW in
With increased typical merchants, a PG service provider revenue. As of April 2005, the total
credit card use, usually sends requests for credit card number of PKIs that have been issued
PKI demand will also transactions generated by small-size e- reached 10,150,000. Due to the law
commerce companies to VAN companies mandating the use of PKIs for all online
increase in order to
and forwards the authorization results transactions exceeding 300,000 KRW,
secure authorized back to the requestor. the PKI service sector is expected to
transactions continuously grow.
As of 2004, INICIS Co. Ltd., Korea Cyber
Payment Inc. (KCP), and KSNet Inc. were 1000
the major PG service providers, accounting 900
Transaction volume (ten thousands)
800
for more than 70% of market share. As
700
shown in [Figure 19], the total revenues 600
for the major PG companies reached 1.3 500
billion KRW in 1999 but increased to 75 400
billion KRW in 2004 due to the expanding 300
e-commerce market. 200
100
0
2001 2002 2003 2004
[Figure 20] Public Key Infrastructure transaction volume
(Source: Ministry of Information and Communication)
8Because revenues of Korea Cyber Payment Inc. (KCP), KSNet Inc, and Allat Inc.
were very small, we used total revenue data from their income statements. In the
case of Cyberpass Inc. and KS NET Inc. we used their PG service revenue data.effects of the credit card on the Korean industry 24
While banks operate credit card 2.4.3 Indirectly Related Industries
businesses themselves, they also earn
B2C E-Commerce
added revenues from transaction
7 76%
commissions because all credit card
74%
transactions are made through bank 6
Percentage of credit card spend
Banks may collect accounts. In addition, since cash advances
72%
Revenue (trillion KRW)
5
service fees by utilize the Inter-bank Shared Network,
70%
4 68%
participating in banks generate revenues by charging
66%
3
credit card payment credit card companies an average 64%
commission of 1,500 KRW per cash 2
processes 62%
advance service. 1
60%
0 58%
As shown in [Figure 21], the revenue of 2000 2001 2002 2003 2004
Percentage of credit card usage
Korean banks related to credit cards Revenue
increased to 4.99 trillion KRW in 2004, [Figure 22] E-commerce sales and credit card spend
recording a 300% increase since 1999. (Source: Direct Marketing Strategy Research Institute,
National Statistical Office)
This growth rate is very meaningful since
total revenues of Korean banks declined
The propagation of credit cards and the
by 4.3% during the same period.
development of IT infrastructure provided
Furthermore, the proportion of credit card
a foundation for the rapid growth of e-
The credit card has related revenue to total Korean bank
commerce businesses in the late 90s. As
become a critical revenue increased from 3.1% in 1999 to
shown in [Figure 22], while revenue
payment system as 9.9% in 2004, which is more than a 300%
generated by B2C e-commerce amounted
increase within five years. These facts
the number of credit to a mere 460 billion KRW in 2000, it has
indicate that the credit card business has
card users have since experienced an average annual
become an essential source of revenue
growth rate exceeding 108% and reached
increased for banks.
6.36 trillion KRW in 2005. Additionally,
56 6 the proportion of electronic purchase
payments using credit cards reached 74%
Gross revenue of commercial banks
54 5
in 2003. Such facts indicate that the
Credit card related revenue
52 4 propagation of credit card use has
(trillion KRW)
significantly affected the growth of the e-
(trillion krw)
50 3
commerce industry.
48 2
46 1
44 0
1999 2000 2001 2002 2003 2004
Credit card related revenue of commercial banks
Gross revenue of commercial banks
[Figure 21] Gross revenue and credit card related revenue
of commercial banks
(Source: Financial Supervisory Services)effects of the credit card on the Korean industry 25
Growth of Other Indirectly Related 2.4.4 Establishment and Propagation of
Industries a Credit Bureau (CB) through
Accumulation of Credit Information
The integrated services delivered by credit
cards can help some industries enlarge Active discussion regarding a CB took
Credit cards will their potential markets and services. place in Korea over several years. Finally,
increase market These industries include travel, leisure, Korea Information Service, Inc. (KISinfo)
transportation, accommodation, and in collaboration with TransUnion of
sizes of other entertainment sectors. The amount of America started a CB business in 2002.
indirectly related credit card spend in the following seven National Information & Credit Evaluation,
industries sectors amounted to a total of 80 trillion Inc. (NICE) entered the business in the
KRW in 2004: 2.4 trillion KRW in same year. In February 2005, a consortium
accommodation, 5.3 trillion KRW in travel, consisting of six banks, three credit card
4.9 trillion KRW in leisure, 990 billion companies, two insurance companies,
KRW in culture, 38.8 trillion KRW in retail, Seoul Guarantee Insurance, VISA, and
2.6 trillion KRW in academic institutions, Korea Ratings launched the Korea Credit
and 24.9 trillion KRW in restaurants. The Bureau, Inc. (KBC). KCB obtained official
inherent easy payment functions of permission from the Financial Supervisory
credit cards combined with internet Commission and has started providing CB
infrastructure have significantly scores from February 1, 2006.
contributed to the growth of these
The credit bureau
indirectly related industries over the last The core of credit risk management and
will play a critical two decades since a large portion of their credit evaluation is the credit information
role in managing revenues occur as advance-purchases obtained from individuals and companies.
credit risk of using credit cards. As seen in [Figure 23], effective
financial institutions communication and information sharing
among various financial institutions, non-
financial institutions, the National Tax
Service, and other public institutions are
prerequisites to a systematic credit risk
management and credit evaluation.
Credit Card Companies
Specialized
Tele-
Credit
Credit card Finance
Communication
Firms
transaction data is Institutions
Credit
the most important Bureau
Savings
data for establishing Banks
(Credit Government
Institutions
Report,
an efficient credit Scoring) (NTS)
bureau Insurance &
Other
Institutions Others
Banks
[Figure 23] Circulation of credit
information using a Credit Bureau9
9Specialized Credit Finance Institutions include credit card companies, facility rental businesses,
short-term lease companies and new technology finance companies. Thrift institutions include
trust accounts of banks, mutual savings banks, the credit union, and the Korean Federation
of Community Credit Cooperatives. Insurance and other financial institutions include insurance
companies, securities companies, and credit guarantee institutions.effects of the credit card on the Korean industry 26
In essence, while over-issuing credit cards 24 110
Economically active population (million)
produced a large number of credit 23 95
defaulters in Korea, the more fundamental 22
Credti card issued (million)
80
problem was that there was no effective 21
65
system required for obtaining credit 20
information. Given the fact that the records 19 50
18
of credit card spend are important sources 35
17
of credit information, the credit card 20
16
industry will play a crucial role in
15 5
establishing a CB - a necessary component
19 0
19 1
19 2
19 3
19 4
19 5
19 6
19 7
19 8
20 9
20 0
20 1
20 2
20 3
04
9
9
9
9
9
9
9
9
9
9
0
0
0
0
of the financial infrastructure and Korean
19
Credit card issued
economy. Economically active population
As seen in [Figure 24], if the CB can 18 5.0
systematically manage the 2 billion annual 16 4.5
credit card transaction information
Number of merchants (million)
14 4.0
Credit card per 1 EAP
generated by 100 million credit cards in 12 3.5
3.0
circulation and 17 million merchants, it 10
2.5
will considerably contribute to the financial 8
2.0
advancement of the Korean economy. 6
1.5
4
1.0
2 0.5
0 0.0
19 0
19 1
19 2
19 3
19 4
19 5
19 6
19 7
19 8
20 9
20 0
20 1
20 2
20 3
04
9
9
9
9
9
9
9
9
9
9
0
0
0
0
19
Credit card per 1 EAP
Number of merchants
[Figure 24] Changes in total number of credit cards issued
and number of merchants
(Source: Korea Credit Finance Association)conclusion - contributions to GDP 27
Conclusion
Contributions to GDPconclusion - contributions to GDP 28
This report has so far analyzed the qualitative and quantitative effects that the Korean credit
card industry has on the national economy by employing various research methods including
statistical analyses. The overall results of this research indicate that the industry influences
the national economy in various positive ways: increasing transaction transparency, tax
revenue, deposits, and contributing to the development of directly and indirectly related
industries. The key findings of this research are summarized in [Table 3].
Enhanced transaction transparency
Increases in both the proportion of credit card spend to total corporate revenues and credit
card usages for corporate entertainment expenses enlarged the size of measurable economic
activities, which subsequently enhanced the overall transaction transparency in the Korean
economy
Increases in tax revenue
Credit card usage increased indirect tax revenue, specifically VAT in several business sectors
Increases in deposits
As credit purchases increase and cash advances decrease, deposits held by non-bank
depository institutions increase, creating investment opportunities
Development of directly and indirectly related industries
Unlike cash transactions, credit card transaction processes for credit purchase and/or cash
advance involve various activities creating economic value in both directly and indirectly
related industries
Directly related industries such as VANs and PGs were introduced by and developed together
with the credit card industry, and have made a big leap towards growth
The credit card industry played an important role in the development and expansion of
indirectly related business sectors such as e-commerce, accommodation, travel, and leisure
[Table 3] The effects of the Korean credit card industry on national economyconclusion - contributions to GDP 29
Converting these positive impacts into After investigating the credit card
economic value provides a foundation to transaction processes and the net
analyze the effects of the Korean credit economic value created through these
card industry on national economy. In processes, we found that the total value
order to calculate the economic value of created by both purchases on credit and
The Korean credit the credit card industry, it is necessary to cash advances totaled up to 21.19 trillion
card industry investigate what roles and functions the KRW in 2002.
generated 21.5 industry plays in various economic sectors.
trillion KRW worth These various analyses allow us to explore Total revenue of directly related industries
the absolute amount of the economic that include VANs, the POS terminal
of economic value
value created by the Korean credit card manufacturing sector, and PGs amounted
for the national industry, as well as the different paths to a maximum of 358 billion KRW in 2002.
economy in 2002 leading towards sound economic This total revenue can be recognized as a
development. portion of the economic value created by
the credit card industry.
Direct Contribution Indirect Contribution
(Economic Value (Sound Economic The Korean credit card industry also
Creation) Growth)
significantly contributes to the growth of
Enhancements in closely related industries such as e-
Credit Card commerce, accommodation, travel,
Transaction
Industry
Transparency leisure, and entertainment industries. The
total amount of the credit card spend in
Directly Related Increases in some sectors amounted to 80 trillion
Industry Tax Revenue KRW in 2004. However, the accurate
magnitude of this contribution is difficult
Indirectly Increases in to quantify and therefore has not been
Related Industry Deposits included in the results of this research.
[Table 4] The Korean credit card industrys direct and indirect On the other hand, although we found
effects on the national economy
statistically significant contributions of
the Korean credit card industry in terms
Thus, this research analyzed the absolute
of increases in deposits, tax revenue and
economic value of the Korean credit card
transaction transparency, this research
industry by taking the sum of the
did not include their estimated economic
economic values generated in three
values due to the difficulties to quantify
different areas: the credit card industry
such values. Instead, we highlighted the
itself, directly related industries, and
positive impacts on the national economy.
indirectly related industries.You can also read
