"Only Consumer Benefits Decrease"... Card Industry Faces Successive Card Discontinuations (Comprehensive)

Card Companies Halt New Card Issuance Citing Cost Reduction
130 Card Types Discontinued by July
Portfolio Adjusted Due to Changing Consumer Patterns
Consumers Complain About Reduced Benefits
Industry Warns Further Merchant Fee Cuts This Year Will Necessitate Benefit Reductions

[Image source=Yonhap News]

[Asia Economy Reporter Ki Ha-young] Credit card companies facing profitability deterioration are consecutively discontinuing the issuance of existing cards, citing cost reduction and other reasons. Not only simple co-branded cards but also steady sellers are being phased out, leading to concerns that the benefits consumers can enjoy are gradually decreasing.

According to the industry on the 16th, Lotte Card stopped issuing new cards such as the Happy Point Lotte Card and Kyobo Bookstore Hottracks Lotte Card starting from the previous day. This month, co-branded cards like Marine Corps Comrades Daily, I Love Seoul Management Corporation, and Jigeum Shop were also discontinued.

By July, the number of discontinued credit and check cards had already exceeded half of the cards discontinued last year. The total number of discontinued credit and check cards from the seven major card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana) as of the end of July this year reached 130 types (87 credit cards and 43 check cards). This figure is close to 65% of last year's 202 types (157 credit cards and 45 check cards).

This includes steady sellers that have been loved for a long time. Shinhan Card stopped selling the 'Lady Card,' which was launched during the LG Card era in 1999 and had been popular for 20 years, in July. Among the cards discontinued by Lotte Card was the so-called 'All My Shopping Card,' which could be used for asset management, causing disappointment among consumers. Hana Card drew attention by simultaneously stopping the issuance of 89 types of cards in June, including 49 credit cards and 40 check cards.

Adjustment Due to Changes in Consumption Patterns... Consumers Say "Benefits Are Decreasing"

The industry explains that the cards recently discontinued are products that have been on the market for more than 10 years and no longer have demand due to changes in customer consumption patterns. They say this is part of launching alternative products following the latest trends such as Private Label Credit Cards (PLCC) and reorganizing the product portfolio. However, consumers complain that the revamped cards offer fewer benefits compared to before. Some even report marketing efforts encouraging the cancellation of already discontinued cards. Kim Seong-mi (pseudonym, 36), a housewife, said, "I recently received a call from a card company urging me to cancel a card that had already been discontinued," adding, "They said they would give me a department store gift certificate worth 180,000 won if I canceled the card, but since the validity period was three years and the benefits were only equivalent to one year, I declined."

The discontinuation of these cards is rooted in the deteriorating profitability of card companies. In fact, the merchant fee revenue, which was the main source of income for card companies, is steadily decreasing. According to the Financial Supervisory Service's Financial Statistics Information System, the merchant fee revenue of the seven major card companies in the first quarter of this year was 1.1468 trillion won, nearly half of the 2.2436 trillion won recorded in the first quarter of 2018 before the merchant fee adjustment.

Along with the reduction in merchant fees, the number of discontinued cards is also increasing. The number of discontinued credit and check cards was 93 in 2017, 100 in 2018, and doubled to 202 in both 2019 and 2020, the years when the merchant fee reduction was applied. Furthermore, since last year, a 'Profitability Analysis System Guideline' has been introduced, allowing card companies to launch only products that can generate profits over the next five years based on profitability analysis. This has made it difficult to launch cards with high-cost benefits. This is why the number of discontinued cards is expected to increase, and so-called premium cards are likely to disappear.

An industry official said, "Card companies, which have started cost-cutting due to the reduction in merchant fees, have no choice but to discontinue products that are not profitable," adding, "If the atmosphere for fee reduction continues in the fee reassessment scheduled for this year, the benefits returned to consumers, such as card benefits, will inevitably decrease."

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