Offline Spending Down 3.3%... Wallets Closed Again Due to COVID-19 Resurgence (Comprehensive)

COVID-19 Resurgence in Third Week of August
Growth Rate of Personal Credit Card Payments Slows
Offline Spending Decreases by 3.3% Due to Social Distancing Impact

[Asia Economy Reporter Ki Ha-young] As the novel coronavirus infection (COVID-19) resurges, card spending has also been recorded to contract again. With the implementation of strict social distancing measures from the fourth week of August, concerns are growing that the consumption downturn will deepen further.

According to data compiled on the 4th from eight major credit card companies (Shinhan, Samsung, KB Kookmin, Hyundai, BC, Lotte, Woori, Hana Card), the personal credit card approval amount for the third week of August (17?23) when COVID-19 began to resurge was 9.9974 trillion KRW. This is an increase of 3.2% (316.9 billion KRW) compared to the same period last year (August 19?25). Typically, card approval amounts increase by about 5?6% annually considering natural growth factors such as inflation. Taking this into account, the resurgence of COVID-19 has frozen consumer sentiment, leading to a reduction in card usage as well.

In particular, offline consumption shrank due to social distancing measures. Offline payment amounts totaled 7.6456 trillion KRW, a decrease of 264.7 billion KRW (3.3%) compared to the same period last year. On the other hand, online consumption rose to 2.3518 trillion KRW, an increase of 581.6 billion KRW (32.8%). It is analyzed that online consumption is compensating for the decline in offline consumption.

According to the 'Domestic Card Approval Performance' published monthly by the Korea Federation of Credit Finance, the total card (credit, check, prepaid cards) approval amount in March, when COVID-19 spread, recorded 66.5 trillion KRW, down 4.3% from the previous year. April also saw a 5.6% decrease compared to the previous year but turned to an upward trend from May. The approval amount in May was 78.1 trillion KRW, a 6.8% increase year-on-year. Especially in June, due to the impact of disaster relief payments, it surged by 11.0% to 75.7 trillion KRW. However, in July, the growth rate slowed to 6%, showing a deceleration in card usage increase.

On the 31st, as the novel coronavirus infection rapidly spreads mainly in the metropolitan area and social distancing level 2.5 is in effect, the area near Yonsei-ro in Seodaemun-gu, Seoul, shows a quiet scene. Photo by Jinhyung Kang aymsdream@

Social Distancing Level 2.5... Concerns of Negative Growth Again

Industry insiders estimate that greater consumption declines occurred in the last week of August (24?30), when nationwide social distancing level 2 was maintained and level 2.5 was implemented in the metropolitan area from the 30th.

According to Korea Credit Data, which manages card payment information for small business owners, the average sales of small business establishments nationwide in the fourth week of August decreased by 25%. This is the lowest level since the 29% decrease in the last week of February (February 24?March 1), when the first wave of COVID-19 spread in earnest. In particular, sales of small businesses in Seoul fell by 32% compared to the same period last year, dropping to the lowest level nationwide.

The Consumer Confidence Index (CCSI) for August, announced by the Bank of Korea, was 88.2, up 4 points from July but still lower than 104.2 in January before the COVID-19 outbreak. It is highly likely to decline again from September. This survey was conducted before the implementation of social distancing level 2, and since then, the metropolitan area’s distancing level has been raised to 2.5.

The government is considering providing a second round of disaster relief payments to stimulate the economy, including reviving consumption. This time, support is expected to be selectively provided to groups affected by the COVID-19 resurgence.

An industry official said, "Since social distancing level 2.5 was implemented in the metropolitan area from the fourth week of August, card payment amounts are also expected to have decreased," adding, "If consumption contraction continues, there is a risk of recording negative growth rates again."

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