Capital Companies vs Card Companies, Tension Over Auto Installment Financing

Capital Companies, Same Function Same Supervision
Card Companies, Different Product Categories Not Comparable

[Image source=Yonhap News]

[Asia Economy Reporter Ki Ha-young] A turf war is unfolding between capital companies and card companies in the auto finance market. This is due to card companies entering the auto finance market, which has traditionally been the main domain of capital companies. As card companies' market share in new car financing has risen to 30%, the capital industry is voicing that the supervisory system should be the same for identical functions.

According to the industry on the 8th, at a meeting held the previous day between the Financial Supervisory Service (FSS) chief and CEOs of specialized credit finance companies, Mok Jin-won, CEO of Hyundai Capital, raised the issue of fairness between capital companies and card companies in vehicle purchases. He argued that there is discrimination in the operation of lease and installment sales agents under the Financial Consumer Protection Act.

Although both provide financial services linked to vehicle sales, if a car salesperson connects a loan through a capital company, it falls under the Financial Consumer Protection Act, but if connected via card payment, it does not. There is dissatisfaction that the strict Financial Consumer Protection Act, including responsibility for incomplete sales, applies only when using capital company installment plans. CEO Mok emphasized, "It is necessary for the supervisory authorities to provide sound guidance to ensure that the basic principle of 'same function, same supervision' is applied by inspecting compliance with the Financial Consumer Protection Act in the sales field."

In response, the card industry explained that it is difficult to compare them on the same level. They claim that card products offered by card companies and installment finance products by capital companies are separate products. The card installment plans provided by card companies when purchasing vehicles are additional services of card products with predetermined interest rates that customers are aware of and use.

The industry interprets this as a turf war to secure market share in the auto installment finance market. As card companies, which urgently need business diversification due to losses in their core merchant fee business, aggressively enter auto installment finance, competition in the auto finance market is intensifying day by day.

According to NICE Credit Rating, the market share of capital companies in new car financing fell nearly 15% from 84.9% in 2016 to 70.3% in the first half of this year. Meanwhile, credit card companies (Shinhan, KB Kookmin, Woori, Samsung Card) nearly doubled their share from 15.1% to 29.7% during the same period. As of the third quarter of this year, card companies have aggressively increased their auto installment finance assets to nearly 10 trillion won, while Hyundai Capital's auto installment finance assets recorded 13.8926 trillion won, down 3.9% compared to the same period last year. In June, Hyundai Capital lowered auto installment interest rates by 0.7 percentage points after card companies began offering low-interest auto installment financing.

An industry insider said, "As card companies aggressively enter the auto installment finance market for business diversification, the turf war with the previously dominant capital companies is intensifying."

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