Benefits Reduced and Removed... Will the 'Aljja Card' Disappear Starting Next Month? (Comprehensive)

Profitability Analysis System Guidelines to be Implemented from the 31st
Sales Costs < Revenue... Deficits Must Be Reported to the Board

[Asia Economy Reporter Ki Ha-young] Additional services on newly released cards are expected to be significantly reduced in the future. This is due to the 'Profitability Analysis System Guideline,' which requires card companies to design new cards so that profits exceed sales costs. Although the purpose is to prevent excessive bleeding competition among card companies, a reduction in consumer benefits seems inevitable.

According to the financial sector on the 21st, the Credit Finance Association held a regulatory review committee meeting the day before to review the 'Card Product Profitability Analysis System Guideline.' If there are no objections after the upcoming representatives' meeting, the guideline is scheduled to be implemented from the 31st.

This guideline is a follow-up measure to the 'Measures to Enhance Card Industry Competitiveness and Improve High-Cost Business Structures' announced by financial authorities in April last year. It was promoted because products with significant losses continued to occur due to imprecise profitability analysis. According to financial authorities, card companies' marketing costs amounted to 6.7 trillion won in 2018, increasing by more than 10% annually since 2015. Additionally, the costs of additional services such as points and mileage embedded in card products increased by more than 1.5 trillion won over three years, from 3.5 trillion won in 2015 to 5 trillion won in 2018. Excessive marketing costs were judged to adversely affect the soundness of card operations.

According to the guideline, each card company is expected to incorporate standards related to profitability analysis and internal control into their internal regulations by next month. Subsequently, newly released products will undergo more rigorous profitability analysis than before.

The core of the guideline is to design new cards so that sales revenue exceeds sales costs and to report countermeasures to the board of directors if deficits occur. In particular, when calculating profits, ambiguous indirect effects such as reputation enhancement and affiliate synergy effects are excluded. Profits consist of annual fees, merchant fees, and installment fees. Costs include additional service costs, marketing, sales management costs, and all direct and indirect costs related to credit sales such as operating costs and funding costs. Accordingly, excessive additional services previously provided for recruitment activities are expected to decrease.

Consumers are expressing dissatisfaction. As the card industry faces difficulties, so-called 'benefit-rich cards' have already been discontinued. Card companies often discontinue products with severe deficits after their validity period of five years. Office worker Kim Ji-eun (33, female) said, "I was using an airline mileage accumulation card, but the cards with substantial mileage accumulation have already been discontinued," adding, "With multiple cards and reduced benefits, I think I will be more cautious about issuing new cards."

Another office worker, Won (35), said, "I got a Toss card last year that gives 10% cashback," and added, "If new cards from card companies have no benefits, I will use Toss or Kakao, which offer more benefits."

Concerns are also being raised within the card industry that attracting new consumers with new products will become more difficult. An industry insider said, "Even before the guideline was established, card companies conducted profitability analyses before launching products," and revealed, "With the guideline requiring reporting countermeasures to the board if deficits occur, profitability analysis will inevitably become more conservative than now, and consumer benefits will decrease accordingly." Meanwhile, this measure is a voluntary regulation, and financial authorities cannot impose sanctions even if it is violated.

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