Card payment fees cut by 40 percent

China's merchants will soon be paying 40 percent less in transaction fees when their customers pay by bank card, the China Securities Journal (CSJ) reported Wednesday, citing insiders from the country's banking industry, a development which many say will be welcomed by the nation's struggling dining industry.

The fee reduction, which was promoted by the National Development and Reform Commission and approved by the State Council, will take effect sometime between the National Day holiday in October and next year's Spring Festival in February, according to the CSJ's report.

Currently, bank card transaction fees - which are charged by card issuers; the country's card payment network, China UnionPay; and the bank accepting the payment - are born completely by merchants, according to regulations approved by the central bank in 2004. In general, most merchants hand over between 0.5 and 4 percent of the amount being transacted by card, with rates varying by industry. For the dining industry, for example, which was long regarded as an industry with one of the highest profit margins, the rate is 2 percent; while for supermarkets, the rate is just 0.5 percent.

Yet, rising rents and labor costs are quickly wearing away restaurants' profitability, and the relatively high transaction fees placed on them is creating an additional burden. According to a recent survey by the China Cuisine Association (CCA), the revenue growth rate of the dining industry dropped to it lowest level in nine years during the first half of this year.

According to the CCA, in some extreme cases, transaction fees can swallow up to 15 percent of a restaurant's profits.

On the other side of the matter, China's banks stand to lose several billion yuan from the cuts, according to a report by the Beijing News, citing the vice president of a commercial bank. "However, compared with their profits, which run in the trillions of yuan, the impact of the decrease will be negligible," Dong Zheng, a Beijing-based credit card expert said.