[1mm Financial Talk] Conflicting Apple Pay Effects: "Profitability, Not Sure" VS "Game Changer"

Rapid Membership Growth but Payment Amounts Remain Average
Short-Term Performance Boost in Question
Opening the Era of Contactless Payments... Increased Potential to Capture MZ Generation

On the 23rd, a customer is making a payment using Apple Pay at a coffee shop in Seoul. Photo by Jinhyung Kang aymsdream@

As Hyundai Card introduced Apple Pay, the contactless payment service from the U.S. tech giant Apple, to the domestic market, opinions on its impact are divided. While the number of new members surged significantly, the actual payment amounts contributing to performance showed little difference from the industry’s average growth rate. On the other hand, some evaluations suggest that the introduction of Apple Pay has opened the era of contactless payments beyond just short-term performance improvement.

Membership 'Boom', Payment Amounts 'Average'... Profitability 'Questionable'

According to the industry on the 9th, from March 21 to April 20, the one-month period following Hyundai Card’s launch of Apple Pay, the number of newly issued cards was 355,000 (237,000 credit cards and 118,000 check cards). This represents a 156% increase compared to 138,000 cards issued during the same period last year.

More than 200,000 cards were issued in the month Apple Pay was launched alone. According to the Credit Finance Association, Hyundai Card’s new member count in March was 203,000, an increase of about 81% compared to 112,000 in the previous month. In comparison, the total new member count across the eight major card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Hana, Woori, Lotte, BC) increased by only 6.9% (620,000) month-over-month during the same period, highlighting Hyundai Card’s outstanding growth. The number of credit card cancellations also decreased by 23.6%, from 72,000 in the previous month to 55,000.

However, whether these new members will actually contribute to Hyundai Card’s performance remains uncertain. The usage amount did not surge proportionally with the increase in membership. According to the Credit Finance Association, Hyundai Card’s credit card usage amount in April was 29.3077 trillion KRW, a 54.6% increase from the previous month. This is only slightly below the average growth rate of 53.7% among the eight major card companies by less than 1 percentage point. This is attributed to the still limited number of stores accepting Apple Pay and relatively low payment amounts per card. A card company official explained, "Hyundai Card pays Apple about 0.15% of the payment amount as a fee, and when including various marketing costs, the financial results are not expected to be significant. Other card companies are also hesitant to rush into Apple Pay for similar reasons."

Changing the Game with 'Contactless Payment'... Potential for Future Market Leadership

Nevertheless, there is a view that Hyundai Card’s impact is not insignificant. It is expected to usher in the era of near-field communication (NFC) payments across the entire industry. In particular, it is analyzed that Hyundai Card could enable the popularization of the EMV contactless payment method, which is used as an international standard, beyond simply adopting NFC technology.

EMV contactless is an NFC-based payment method developed by international payment companies Europay, Mastercard, and Visa. It is widely used worldwide, including in English-speaking countries, Europe, and Japan. The method, which allows payments by simply bringing a credit card close to a terminal without swiping or inserting it?similar to transportation cards or Samsung Pay?has received great acclaim. Hyundai Card, which adopted the EMV contactless payment method early on, is expected to change the credit card payment method itself with the launch of Apple Pay as a turning point. In fact, Hyundai Card has been issuing credit cards capable of contactless payments since February 2017. Overseas, Hyundai Card was the only card that allowed such tap-to-pay transactions. In the first year, the issuance rate of contactless credit cards exceeded 80%, and this year, the rate has reached 99.8%. This contrasts with most domestic credit card companies, which have been less proactive in issuing contactless credit cards.

Hyundai Card explained, "At the time, because magnetic stripe or IC chip payment terminals were more common than NFC terminals in Korea, issuing contactless credit cards was avoided as it would only increase production costs without leading to popularization. Nevertheless, we focused on the advantages of this method, which does not require unnecessary physical contact."

Most of those who experienced contactless payments through Hyundai Card’s Apple Pay belong to the MZ generation (Millennials + Generation Z). Among new members during the month following the Apple Pay launch, 51% were in their 20s, and 28% were in their 30s, with the 20s and 30s age groups accounting for nearly 80%. An industry insider said, "Although it may not immediately contribute to performance, it clearly has the effect of securing a major future demand base. However, since other card companies can also adopt this method, continuous differentiation will be necessary."

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