Everyone Jumps into the Car Installment Finance Market...Card Companies Brace for Fierce Competition

[Asia Economy Reporter Ki Ha-young] As credit card companies continue to enter the auto installment finance market, which was previously dominated by capital companies, fierce competition is expected. Credit card companies, whose profits have been hit by reductions in merchant fees, are rushing into the auto installment finance market as part of their business diversification efforts.

According to industry sources on the 13th, Shinhan Card will acquire Hyundai Capital's long-term rental car assets on the 27th. The acquisition amount is approximately 500 billion KRW. Through this, Shinhan Card will be able to operate long-term rental businesses with a standard useful life of over 80%. Shinhan Card expects that this asset acquisition will secure long-term income-generating assets and increase new business opportunities through high-quality customers.

Credit card companies are rushing into the auto installment finance market as part of their revenue diversification. The auto installment finance market has low delinquency rates and a high return on assets (ROA), enabling a stable profit structure.

In fact, Shinhan Card and KB Kookmin Card offset the deteriorated profitability caused by the reduction in merchant fees last year through installment finance and leasing businesses. Shinhan Card, which achieved a net income of 508.8 billion KRW last year, saw its merchant fee revenue decrease by 2.4% year-on-year to 211.7 billion KRW. However, leasing business revenue (187.4 billion KRW) and installment finance revenue (134.8 billion KRW) increased by 48.1% and 22.5% respectively compared to the previous year, maintaining profitability. KB Kookmin Card earned 71.3 billion KRW from auto installment finance last year, a 60.8% increase year-on-year. As a result, KB Kookmin Card recorded a net income of 316.5 billion KRW, up 10.4% from the previous year.

They are also intensifying businesses related to auto finance. Shinhan Card upgraded its auto finance platform 'Shinhan Card MyAuto' earlier this year. It provides services such as used car sales, management, and vehicle information inquiry, attracting auto installment finance customers. KB Kookmin Card opened the 'Auto Finance Center,' a specialized used car installment finance branch, in January.

Additionally, KB Capital is expanding its installment finance business by linking its used car trading platform 'ChaChaCha 3.0' with auto finance products and services. Samsung Card launched 'Direct Auto' in 2016, the industry's first offline auto finance service converted to mobile. Since then, it has steadily added services such as 'Check My Car Price' and 'Sell My Car,' increasing consumer touchpoints. Hana Card also plans to launch an auto installment finance product in the second half of this year.

However, as not only capital companies but also credit card companies and banks enter the auto finance market, concerns about excessive competition are rising. A financial industry official said, "Credit card companies are entering the auto installment finance market to compensate for declining merchant fee revenues," adding, "Since capital companies and others have already entered the auto installment finance market, which is not a blue ocean, fierce competition is expected going forward."

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