[Viewpoint] Card Companies and Overseas Remittance Services

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

Recently, card companies have been actively seeking new business ventures. This is because the main source of revenue for card companies, merchant fee income, has significantly decreased, and the alternative revenue source, auto installment financing, has become increasingly competitive. Competition with capital companies and banks in this sector has intensified, making continuous profit generation challenging. Moreover, card loans, which offered high margins, have faced difficulties in business expansion due to the government's reduction of the maximum interest rate and the strengthening of loan volume regulations.

Small-scale, simple overseas remittance services are promising new businesses for card companies. Overseas remittance services, once monopolized by banks, have been a representative service business with high customer dissatisfaction due to high fees. However, with the advancement of digital information and communication, this service has emerged as an innovative service in the new trend of finance that reduces transaction costs. In particular, overseas remittance services are expected to play a significant role in attracting financial consumers. For example, KakaoBank, which launched overseas remittance services in 2017, recently surpassed 1 million transactions. Low fees and fast remittance times were key competitive advantages. Based on the competitiveness of its overseas remittance services, KakaoBank has succeeded in securing loyal customers in a short period.

The future leadership of the payment market is expected to be determined by the competitiveness of overseas remittance services. Recently, the government allowed securities companies and card companies to engage in overseas remittance businesses, so the overseas remittance service market, once monopolized by banks, has already entered a stage of unlimited competition among industries. In particular, the domestic overseas remittance market size is recording a steep demand growth, increasing by more than 50% within three years. This is due to the growing number of global companies expanding worldwide, as well as increases in foreign workers and overseas students. If the COVID-19 situation subsides, the demand for overseas remittance services is likely to increase even more sharply.

Recently, the launch of overseas remittance services by fintech companies has also been progressing remarkably fast. The remittance fees of overseas remittance-specialized fintech companies are up to 90% cheaper compared to banks. Global digital overseas remittance platform providers are also expanding remittance services targeting major countries with high numbers of students studying abroad.

Recently, China's Alipay's acquisition of the UK foreign exchange startup World First indicates the growth potential of this business. Alipay's intention to enter the overseas remittance business in earnest is also confirmed by the operation of an international payment solution platform for small businesses. In other words, Alipay aims to strengthen its position in the international payment market by launching financial services that support remittances of overseas online market sales revenue to the home country.

From the perspective of card companies, active partnerships with overseas remittance-specialized fintech companies are desirable to secure the overseas remittance service market in the short term. Given that card companies have formed partnerships with various business sectors through the Private Label Credit Card (PLCC) business, partnerships with competitive overseas remittance-specialized fintech companies can develop into a win-win business model for both parties. Furthermore, with the account transfer system expanded to the secondary financial sector and card companies planning to enter comprehensive payment services, securing a competitive edge in the overseas remittance service sector seems necessary to attract bank customers.

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

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