Expansion of Car Installment Plans... Card Industry's Installment Finance Assets Approaching 10 Trillion Won

[Asia Economy Reporter Yu Je-hoon] The installment finance assets of major domestic card companies have increased by about 1.2 trillion KRW over the past year, approaching 10 trillion KRW. This is because each card company has been focusing on automobile installment finance operations, a major business of capital companies, as part of discovering new revenue sources over the past few years.

According to the Financial Supervisory Service's Financial Information Statistics System on the 12th, the installment finance assets of seven domestic card companies (Shinhan, KB Kookmin, Samsung, Hyundai, Lotte, Woori, Hana) amounted to 9.862 trillion KRW as of the end of last year. This represents a 12.9% (about 1.13 trillion KRW) increase compared to the previous year.

Installment finance assets include home appliances, machinery, and others, but the proportion of automobile installment finance assets is overwhelming. As of the end of last year, automobile installment finance assets in the card industry amounted to 9.7663 trillion KRW, accounting for 99% of the total installment finance assets.

Regarding automobile installment finance assets by company, Shinhan Card (3.8919 trillion KRW) and KB Kookmin Card (3.4569 trillion KRW) formed the leading group, while the high asset growth rates of latecomers stood out. Woori Card recorded 1.5735 trillion KRW, a 47.4% increase over one year, and Lotte Card recorded 126.9 billion KRW, a 50.9% increase. Hana Card, which entered the automobile installment finance business for the first time last year, also had related assets amounting to 365.7 billion KRW.

The automobile installment finance assets of the card industry have shown rapid growth over the past several years. About 10 years ago, in 2011, only two card companies handled automobile installment finance, with assets at about 1.26 trillion KRW. Five years later, in 2016, this increased to five companies with 3.47 trillion KRW, a 2.7-fold increase, and last year it rose again to about 9.79 trillion KRW, a 2.8-fold increase.

New entrants are also increasing. Last year, Hana Card joined the market, and recently Hyundai Card, which separated its management from Hyundai Capital, also entered the automobile installment finance market. Since Hyundai Motor and Kia, the largest domestic automakers, are sibling companies, it is expected that there will be significant synergy effects.

The reason the card industry is entering the automobile installment finance market, which was previously considered the domain of the capital industry, is that the profitability of their core business is deteriorating day by day. In the core credit sales sector, it is difficult to expand profitability due to merchant fee rate regulations, and in the other major business area, long-term card loans (card loans), profitability is constrained by the Debt Service Ratio (DSR) regulations.

A financial industry official stated, "Although capital companies still hold a much larger share in the automobile installment finance market, since card companies are expanding the scale of related businesses with relatively low funding costs, the share of the card industry is inevitably expected to gradually increase."

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