'Mutually Beneficial Payment System' to Expand into the Distribution Sector

On-site Meeting Held for Companies Using the Mutually Beneficial Payment System on May 28

Announcement of Institutional Improvements to Expand the System

The government has announced plans to actively expand the “Win-Win Settlement” system, which had previously been centered on the manufacturing sector, into the distribution sector, including wholesale and retail businesses. The Win-Win Settlement is a payment system that allows prime contractors to directly pay transaction amounts to their subcontractors.

According to the Ministry of SMEs and Startups, a “Win-Win Settlement User Companies On-site Meeting” was held on May 28 with the participation of major conglomerates and first-tier suppliers actively utilizing the system, as well as key financial institutions such as Shinhan Bank and Hana Bank. The purpose of this meeting was to assess the achievements of the Win-Win Settlement system, which has become a key payment method for transactions between large companies and SMEs, and to discuss ways to expand its use not only in the manufacturing sector but across all industries.

Sungsook Han, Minister of SMEs and Startups, is taking a commemorative photo with participants of the "Win-Win Payment Utilization Companies On-site Meeting" held on the 28th at the Shinhan Bank headquarters in Jung-gu, Seoul. Ministry of SMEs and Startups

The Win-Win Settlement system was introduced in 2015 to enhance the security of payment collection for small and medium-sized enterprises and to improve their cash liquidity. When a purchasing company pays for delivered goods via Win-Win Settlement, lower-tier suppliers are guaranteed cash payment on the settlement date. They can also receive early payment at low financial costs, leveraging the high credit rating of the purchasing company. Unlike promissory notes, even if the purchasing company defaults, financial institutions cannot exercise the right of recourse against lower-tier suppliers, thereby preventing a domino effect of bankruptcies. According to the Ministry of SMEs and Startups, the amount managed through the Win-Win Settlement system increased from 24.6 trillion won in 2015 to 189.1 trillion won last year, with the number of participating companies rising steeply from approximately 60,000 to 185,000 during the same period.

In addition to this quantitative growth, the Ministry of SMEs and Startups plans to pursue qualitative improvement by first expanding the participation of purchasing companies. In sectors where the Win-Win Settlement system is well established, such as materials, parts, and equipment manufacturing, the weight of Win-Win Settlement performance will be increased in the overall win-win cooperation evaluation. This will encourage more large and mid-sized companies to participate. The ministry will also seek to ease the credit requirements demanded by financial institutions for large and mid-sized companies adopting the system. Furthermore, the system will be improved to grant extra evaluation points for companies with shorter average maturity periods for Win-Win Settlement bonds, thereby encouraging faster payments.

The Ministry of SMEs and Startups also plans to ease the procedural burden for secondary or lower-tier suppliers, who currently must use the same bank as the purchasing company or first-tier supplier to participate in the Win-Win Settlement. This will be achieved by introducing and expanding a “One-Stop Win-Win Settlement System” in the financial sector, which allows payment collection even when different banks are used. In addition, companies that promptly pay at least 40% of the mandatory payment ratio to lower-tier suppliers via Win-Win Settlement will receive incentives such as exemption from regular inspections of subcontracting transactions and preferential consideration for selection as outstanding Win-Win Settlement companies. Financial institutions will also support the expansion of participation by secondary or lower-tier suppliers by raising interest rates on dedicated Win-Win Settlement deposit accounts and lowering loan rates for outstanding companies utilizing the system.

To promote the use of Win-Win Settlement in the distribution sector, the ministry will strengthen preferential treatment in win-win cooperation evaluations and include the system in the online platform win-win cooperation index. New awards will be established for outstanding companies in the distribution sector. In addition, by working with major retail associations and organizations such as department stores and home shopping channels, the ministry plans to hold a contest for best practices in Win-Win Settlement and develop guidelines for sector-specific adoption, thereby expanding participation among distribution companies.

Presiding over the meeting, Minister Han Sung-sook of the Ministry of SMEs and Startups stated, “The spread of Win-Win Settlement so far has been the result of financial institutions, large companies, and partner firms sharing the value of win-win cooperation and striving for mutual growth. We hope that, with these new system improvements, voluntary efforts for win-win cooperation will further expand, establishing Win-Win Settlement as a representative transaction method between large and small companies, especially in the manufacturing and distribution sectors.”

This content was produced with the assistance of AI translation services.