Card Companies Gain Influence... Heating Up the Auto Installment Financing Market

Hyundai Card Also Enters the Auto Installment Market

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] Competition in the auto installment finance market is intensifying. Following the capital companies that have traditionally led the market, the credit card industry is also actively entering the field.

According to the Financial Supervisory Service's Financial Statistics Information System on the 2nd, the auto installment finance assets of six domestic card companies (Shinhan, KB, Kookmin, Woori, Samsung, Hana, and Lotte Card) amounted to approximately 9.7948 trillion KRW as of the end of the third quarter last year. This represents a 13.1% increase compared to the same period the previous year.

The auto installment finance assets of card companies have continued to surge over the past several years. About 10 years ago, in the third quarter of 2011, only two companies handled these assets, totaling around 1.2572 trillion KRW. However, by the third quarter of 2016, this had more than doubled to 3.0311 trillion KRW, and last year it increased more than threefold to 9.7948 trillion KRW.

As card companies strengthen their offensive, the position of capital companies that have dominated the existing market is narrowing. In fact, as of the end of the third quarter last year, the auto installment finance assets of capital companies stood at 20.8341 trillion KRW, down by about 400 billion KRW from 21.2493 trillion KRW in the same period the previous year.

Shinhan and KB Kookmin Card had previously stood out in the existing auto installment finance market, but challenges from latecomers are also intensifying. Woori Card has been strengthening its auto finance efforts by establishing an Auto New Business Team within its Auto Finance Headquarters earlier this year, and Hana Card's auto installment finance assets reached about 360 billion KRW in its first year of business alone.

In particular, Hyundai Card, which recently separated its management from Hyundai Capital, has also entered the auto installment finance market. Given Hyundai Card's "brotherly" relationship with Hyundai Motor and Kia, which lead the domestic finished car market, there are expectations that synergy effects can be realized.

The reason card companies are intensifying their offensive in the auto installment finance market is profitability. While losses from merchant fees have been offset through long-term card loans (card loans), there are few areas generating profits aside from this. An industry insider said, "As profitability may deteriorate this year due to adjustments in merchant fee rates, the attack on the auto installment finance market will continue."

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