Five out of Eight Card Companies Implement 'Voluntary Retirement'... "Aftermath of Fee Reduction"

Five of Eight Major Card Companies Implement Voluntary Retirement
Not a Large-Scale Layoff, but
Proactive Cost-Cutting Measures Due to Industry Downturn Including Additional Card Fee Reductions

[Asia Economy Reporter Ki Ha-young] A severe wave of large-scale restructuring is sweeping through the credit card industry, which achieved strong performance last year. Although it is said to be an optimization of the workforce structure in response to the rapidly changing financial environment, there are concerns that the aftershocks of credit card fee reductions are materializing as workforce cuts. In particular, with this year's interest rate hikes and the financial authorities' strengthened management of household debt worsening the business environment, there are worries that workforce adjustments for cost reduction will accelerate further.

According to the credit card industry on the 11th, five out of eight specialized credit card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana, and BC Card) implemented voluntary retirement programs around the end and beginning of the year. Industry leader Shinhan Card announced a voluntary retirement notice for the first time in two years. Employees with more than 10 years of service are eligible to receive up to 35 months' worth of their average monthly salary. On the same day, Hana Card also posted an internal notice about voluntary retirement, offering 33 to 36 months of base salary. The target group is those born between 1968 and 1970.

Earlier, KB Kookmin, Lotte, and Woori Card also conducted voluntary retirement programs at the end of last year. KB Kookmin Card offered up to 36 months' salary for voluntary retirement, with about ten applicants. Lotte Card also targeted employees with more than 10 years of service, with about ten people leaving the company. Lotte Card provided applicants with 32 to 48 months of base salary depending on their tenure, plus up to 20 million KRW for tuition fees. Woori Card paid up to 36 months of average monthly salary, with 12 employees opting for voluntary retirement.

The credit card industry explains that these decisions are not about large-scale workforce reductions but about resolving imbalances in workforce structure and providing new opportunities for employees. However, there are criticisms that these are preemptive cost-cutting measures due to the deteriorating business environment.

In fact, the reality faced by the credit card industry this year is challenging. From this year, the card merchant fee rate has been reduced by up to 0.3 percentage points, requiring the industry to compensate for about 470 billion KRW in lost fee revenue. Loan products such as long-term card loans (card loans), which have offset fee deficits, are also expected to shrink due to strengthened household debt management. Additionally, rising interest rates increase funding costs, raising the burden, and competition with big tech (large information and communication companies) platforms is intensifying.

Workforce reductions due to these factors have been ongoing in recent years. Card solicitors are a representative example. Last year, 1,072 card solicitors left the industry. According to the Credit Finance Association, the number of card solicitors at the seven specialized card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, and Hana Card) stood at 8,145 at the end of last year. This is an 11.6% decrease from 9,217 at the end of the previous year. Since the 10,000 mark was broken in 2020 when COVID-19 began, the number has been steadily declining. The number of card solicitors, which reached 20,289 in 2015, has sharply dropped to one-third over six years.

The total number of employees at the eight specialized card companies has also been declining since an increase in 2018. The total number of card company employees, which rose to 12,449 at the end of June 2019, decreased by 356 (2.9%) to 12,093 at the end of June last year. During the same period, the number of domestic branches fell from 210 to 197, with 13 branches closing.

An industry insider said, "Considering not only the reduction in merchant fees but also the future rise in funding interest rates and the decrease in loan income due to household debt regulations, profitability deterioration is inevitable," adding, "We have no choice but to pursue cost reduction measures, including workforce adjustments."

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