SEOUL -- The world's largest payment network Visa has been in a one-year-long battle with China's biggest electronic payment network China UnionPay over royalty payments.
The battle is poised to enter a new phase as South Korea's leading credit card firm BC Card plans to file a case against Visa with the country's antitrust watchdog over the issue.
"BC Card plans to file a complaint against Visa with the Fair Trade Commission (FTC) over its unfair transaction activities by end-June," an official at the South Korean card firm told Xinhua.
According to the official, Visa has recently imposed fines of a combined $100,000 on BC Card claiming that the local credit card firm did not process international transactions through the VisaNet payment system.
Visa has required international transactions to be processed only through its network, warning fines will be imposed on the partners disobeying the rules.
BC Card said Visa forcefully withdrew $50,000 from its settlement account as it used the network established between BC Card and China UnionPay for international transactions.
Chinese holders of UnionPay card co-branded with BC Card do not have to pay the normal 1 percent service charge for transactions in South Korea, but Visa imposed fines on BC Card over not using the VisaNet system.
Another fine of $50,000 was imposed on BC Card as the local card issuer processed international transactions through the network set up between BC Card and Star Network, a US automated teller machine (ATM) firm.
After starting cooperation with China UnionPay in January 2005, BC Card sealed a business partnership with Star Network in October 2009, enabling BC Card customers to get card services with no need of paying the 1 percent service fee for international transactions.
BC Card said its alliance with UnionPay and Start Network has benefitted both the card issuer and its customers because the card firm does not need to pay royalties to Visa, with its customers saving the 1 percent charge for international transactions.
South Korea's credit card issuers pay 0.2 percent of card bills for international transactions as royalties to Visa, and 0.04 percent for local transactions. Royalties paid to foreign payment networks such as Visa and MasterCard reached 180 billion won ($166 million) in 2010.
Users of local credit card normally pay the 1 percent service charge for international transactions to foreign payment networks, with the charges amounting to 80 billion won last year.
This is half the story, however. Visa has been locked in battle with China UnionPay over royal payments for one year.
Back in June 2010, Visa said it will stop banks from using China UnionPay's payment system to settle international transactions for co-branded Visa and UnionPay credit cards, warning penalties will be charged if they do not obey the rule.
Visa argued that it was simply enforcing its existing regulations that require global transactions to be processed through the VisaNet system, adding it was not specific to China UnionPay.
In response to that, the banking card association said Visa does not have the right to block the use of its own payment network for dual-currency credit cards abroad.
China UnionPay also noted it is unfair to pay royalties for co- branded credit cards to settle domestic transactions.
As the sole bank card processor in China, China UnionPay's overseas presence has grown significantly, with its cards accepted in more than 90 countries and regions.