40 Trillion KRW Auto Installment Finance Market Sparks Card Companies' Spring and Autumn Period

Hanacard Also Enters Installment Finance Market This Year
Intense Competition in Business Diversification Due to Merchant Fee Reduction

[Asia Economy Reporter Ki Ha-young] Competition among credit card companies to dominate the domestic auto installment financing market, valued at 40 trillion KRW, is expected to be fierce again this year. With Hana Card launching auto installment financing this year, six credit card companies now offer related services.

According to the industry on the 18th, Hana Card introduced an auto installment financing product as a new business on the 4th. The product is available for purchasing all domestic and imported car brands and comes in two types: "Auto Halbu" and "Auto Loan." For Auto Halbu, customers can pay the vehicle purchase amount with Hana Card and repay in installments for up to 60 months at an annual interest rate as low as 1.0%. Depending on the product, customers can receive cashback of up to 1.2% on the prepayment amount and 1.0% on the loan amount. Auto Loan is a product that can be used even by non-Hana Card members.

With Hana Card entering the auto installment financing market, all full-service credit card companies now handle auto installment financing products. Five companies?Shinhan, KB Kookmin, Samsung, Woori, and Lotte Card?have already entered the market. Hyundai Card operates its auto installment financing business through its affiliate Hyundai Capital, while BC Card mainly handles payment processing services.

While card fee income has deteriorated due to reductions in merchant commission rates, revenue from auto installment financing is increasing. According to the Financial Supervisory Service’s Financial Statistics Information System, as of the third quarter of last year, the total revenue from auto installment financing for five credit card companies (Shinhan, Samsung, KB Kookmin, Woori, and Lotte Card) was 203.3 billion KRW, an 11.4% increase compared to the previous year. Shinhan Card maintained its lead with 95.562 billion KRW, followed by KB Kookmin Card with 69.67 billion KRW. Woori Card recorded 19.148 billion KRW and Lotte Card 1.407 billion KRW, marking increases of 37.7% and 55.8% respectively from the previous year. Samsung Card was the only one to see a decline, with revenue dropping 41.1% to 17.54 billion KRW.

Auto installment financing assets are also steadily increasing. During the same period, auto installment financing assets reached 8.6866 trillion KRW, up 16.7% from 7.4414 trillion KRW the previous year. Shinhan Card held the largest asset size at 3.409 trillion KRW, followed by KB Kookmin Card at 3.3078 trillion KRW. KB Kookmin Card’s asset size surged 31.4% year-on-year, narrowing the asset gap between the two companies to 101.2 billion KRW.

As diversification of business is necessary to offset deteriorating profitability caused by reduced merchant fees, competition among credit card companies in the auto installment financing market is expected to intensify. An industry insider said, "With merchant fee income steadily declining, the auto installment financing market is one that credit card companies cannot afford to give up," adding, "The market is expected to expand from new cars to used cars and other areas."

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