Capital, Market Share Plunge... Intensifying Battle Between Card Companies and Car Finance Market

Credit Card Companies Diversify Businesses
Market Share Nearly Doubles
Capital Companies Decrease by Over 10%

[Asia Economy Reporter Ki Ha-young] In the new car financing market, the market share of capital companies has decreased by more than 10% over the past four years. This is due to credit card companies, which need to diversify their businesses, entering the automobile financing market, the main stage of capital companies. It is expected that the fierce competition between capital companies and credit card companies over the automobile financing market will intensify.

According to the 'Securities and Capital Credit Risk Outlook' released by NICE Credit Rating on the 28th, the market share of capital companies in the new car financing market has fallen by more than 10% over the past four years. The market share, which reached 84.9% in 2016, dropped to 77.0% in 2017, 75.9% in 2018, 75.6% in 2019, and 72.1% as of the third quarter of last year. This represents a 12.8% decrease over four years.

On the other hand, credit card companies (Shinhan, KB Kookmin, Samsung, Woori Card) nearly doubled their market share from 15.1% to 27.9% during the same period. Especially, their market share increased by 3.5 percentage points compared to the previous year. The credit card industry, facing profitability deterioration due to reduced merchant fees, entered the new car financing market, which was the main business of capital companies. It is evaluated that the decline in capital companies' market share in the new car financing market has accelerated after the COVID-19 pandemic.

Credit card companies have higher credit ratings compared to capital companies. Therefore, they can gain a relative advantage in terms of funding interest rates and are expanding their market share in the new car financing market based on this. On the other hand, capital companies, except for captive companies like Hyundai Capital of Hyundai-Kia Motors and installment financing companies for imported cars, inevitably have to reduce the proportion of automobile financing. In fact, last year, Shinhan Capital transferred automobile financing assets to Shinhan Card. Among the 25 companies rated by NICE Credit Rating, the proportion of automobile financing assets in the total managed bonds of capital companies decreased from 52.7% at the end of 2016 to 46.4% as of the third quarter of last year.

This year, with Hana Card also entering the automobile installment financing market, all specialized credit card companies now handle automobile installment financing products. Five companies, including Shinhan, KB Kookmin, Samsung, Woori, and Lotte Card, have already entered the automobile installment financing market. Credit card companies are expanding their automobile installment financing assets and growing in size. As of the third quarter of last year, credit card companies' automobile installment financing assets recorded 8.6866 trillion won, a sharp increase of 16.7% compared to the previous year.

An industry insider said, "Capital companies still hold an advantage in the used car market, but the market share of credit card companies in the new car financing market is noticeably expanding," adding, "Competition to secure revenue sources between the two industries facing profitability decline is expected to become increasingly fierce."

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