Movies and late-night snacks paid by phone... 2nd quarter sees 2.55 million check cards disappear

7 Major Credit Card Companies' Check Card Issuance Decreased by 2.55 Million in Q2
Contactless Payments Increased Due to COVID-19 Impact, Leading to Growth in Simple Payments

[Asia Economy Reporter Ki Ha-young] The payment market is rapidly changing due to COVID-19. Mobile simple payments, or "Pay," which are not physical transactions like cash or cards, have become central to daily life. In particular, check cards, which offer fewer benefits compared to credit cards, have seen a sharp decline in issuance, leading to their marginalization in the market. As simple payment methods such as Naver Pay and Kakao Pay become the primary transaction tools for the future potential customer base of the 10-20 age group, there is speculation that the influence of card companies may also diminish in the future.

According to the Credit Finance Association on the 6th, as of the end of June, the number of check cards issued by seven specialized card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana Card) was 64.032 million. This is a decrease of 2.551 million cards (3.8%) compared to the same period last year.

The total number of check cards issued has been declining since 2018. According to the Financial Supervisory Service, the number of check cards reached 111.58 million at the end of 2018, decreased by 640,000 to 110.94 million in 2019, and further declined by 870,000 to 110.07 million last year. Coincidentally, the timing when the issuance of check cards began to decrease coincides with the surge in the number of simple payment users.

The card industry analyzes that as COVID-19 prolongs, non-face-to-face payments have rapidly increased, and big tech's simple payment services are replacing check cards. In fact, the simple payment market is growing rapidly. According to the Bank of Korea, the average daily usage amount of simple payments last year was 449.2 billion KRW, an increase of 41.6% compared to the previous year. In particular, electronic financial operators such as Kakao Pay and Naver Financial accounted for the highest share of 45.7% of the usage amount.

In the recent second-quarter earnings announcement, Naver Pay achieved a payment amount of 9.1 trillion KRW, a 47% increase compared to the previous year. The balance of prepaid funds for big tech's simple payment and remittance services is also increasing. As of the end of June, the prepaid fund balances of Kakao Pay and Naver Pay were 335.1 billion KRW and 68.9 billion KRW, respectively. Compared to the end of March, Naver Pay increased by 23.3%, and Kakao Pay by 4.4%.

The card industry is concerned that in the long term, simple payments may encroach on the check card market. The risk of losing future potential customers, who were previously attracted through check cards, to big tech has increased. The number of teenagers receiving allowances via pay services instead of check cards is already rising, and big tech is also launching financial services exclusively for teenagers. Especially for Generation Z, who are familiar with big tech, there is a strong tendency for a "lock-in effect," where once a financial service is chosen, it is maintained. A recent survey conducted by the Korea Fintech Industry Association showed that 9 out of 10 MZ generation respondents use fintech platforms for simple payments.

An industry insider said, "In the payment market, check cards and simple payments can be seen as substitutes for each other. If check cards continue to decline, the points of contact for card companies to secure future customers will decrease accordingly," expressing concern.

Experts also evaluate that the position of card companies in the payment market is threatened by big tech. Yeo Yoon-ki, senior researcher at Korea Credit Rating, said, "In the short term, simple payment providers will not replace credit card companies to dominate the payment market," but added, "As the influence of simple payment providers strengthens in the future, competition for leadership will intensify, and securing loyal customers will become important."

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