[Viewpoint] Card Companies and the Comprehensive Payment Business

Seo Ji-yong, Professor, Department of Business Administration, Sangmyung University

This year’s key topic in the payment market seems to be the entry of card companies and fintech firms into the comprehensive payment business. The comprehensive payment business is a licensed business that allows non-bank payment service providers to issue accounts, a privilege previously reserved only for banks. By utilizing these accounts, non-bank payment providers can offer account-based payment services such as salary transfers, card payments, insurance premiums, and utility bill payments, which has attracted significant interest from non-bank payment operators.

Last year, the Financial Services Commission’s announcement of the 'Comprehensive Digital Finance Innovation Plan' and the proposal to amend the Electronic Financial Transactions Act have already made the introduction of a licensing system for the comprehensive payment business visible. The qualification criteria for operators, including a minimum capital requirement of 20 billion KRW, were also announced. Since the government’s plan to introduce the comprehensive payment business aims to enhance the safety of financial transactions through digital transformation and strengthen financial innovation, the possibility and role of card companies entering this business are highly anticipated.

First, enhancing the safety of financial transactions is a crucial issue as mobile-based digital financial transactions increase. Last year, Swiss security firm ImmuniWeb pointed out in a report that the United States and the United Kingdom, advanced countries in digital finance, experienced the highest number of personal and corporate data breaches. This suggests that digital financial incidents are a side effect of the convenience brought by digital financial transactions. The influx of numerous small fintech companies with lower security capabilities compared to financial institutions, due to deregulation in these countries, also seems related.

Given the domestic market characteristics where card transactions dominate payment settlements, card companies are believed to have secured a considerable level of security capabilities through substantial investments and efforts over a long period to prevent financial accidents. Representative examples include AI-based Fraud Detection Systems (FDS) and defense mechanisms against hacking attacks through arbitrary combinations and dynamic transformation of card numbers. Hyundai Card’s recognition of its top-level risk management capabilities at the 'Visa Security Summit,' the largest security event in the Asia-Pacific region held late last year, attests to this.

Next is the aspect of strengthening financial innovation. The start of financial innovation lies in developing data-driven customized products that meet customer demands and expectations. Card companies hold vast amounts of consumer sales data based on payment information from approximately 3 million merchant stores. Customer sales slips contain both consumer purchase and payment information, making them useful data for understanding consumer behavior. Card companies have long invested in acquiring big data analysis capabilities and have reached the level of conducting industry analysis and product strategy consulting businesses. Some card companies are even pursuing overseas expansion of big data consulting. The recent inclusion of multiple card companies among the first MyData project operators also proves the competitiveness of card companies in the data sector.

Card companies already have experience launching various customer-tailored services, such as cards optimized for different consumption patterns. Through their card loan business experience, they also possess in-depth analytical know-how regarding low-credit borrowers, making them suitable for realizing inclusive finance. Moreover, they are showing competitiveness in securing platforms that serve as customer touchpoints, such as platforms currently used in auto installment financing.

In conclusion, with their advanced security capabilities, competitive advantage as consumer data handlers, and platform competitiveness, card companies are well-qualified to align with the government’s rationale for promoting the comprehensive payment business and are expected to contribute to enhancing the safety of financial transactions and innovating the financial industry in the future.

[Seo Ji-yong, Professor, Department of Business Administration, Sangmyung University]

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