Consumer complaints have erupted over a local online discount app operator's abrupt decision to significantly reduce its much-touted financial reward service.

In recent months, Mergepoint has gained huge popularity in Korea for its discount service under which consumers can buy the so-called Mergepoints at a discount of 20 percent off the regular price and use them in about 60,000 places nationwide, like local retail chains, convenience stores and coffee shops.

It has attracted about 1 million members, with a daily 200,000 visitors, and posted an average 30 billion won (US$25.6 million) in monthly transactions, according to industry data.

Earlier this week, however, its operator Mergeplus changed the terms, limiting the use of its discount points to food-related services, like restaurants, bakeries and coffee shops.

The sharp reduction in service scope came as the financial authorities have reviewed the validity of the company's business, as it is suspected of being engaged in the electronic gift card business without legal grounds.

The company said it will normalize the service in the fourth quarter and promised a full refund.

But the sudden announcement has angered tens of thousands of its users.

On Friday, hundreds of people flocked to the headquarters of Mergeplus in Seoul, demanding a full refund for the points they have purchased.

Some of the consumers said the company returned some of the payment but refused to give it back 100 percent.

The financial watchdog said it will monitor the situation and cooperate with other authorities in a bid to minimize consumer damage.

Source: Yonhap News Agency