Nearly Half of Card Company Branches Closed in Four Years

Causes Such as High Interest Rates and Poor Performance
Younger Generation Accustomed to Non-Face-to-Face Card Issuance

Domestic card companies are continuously reducing their branch offices. Facing difficulties due to prolonged high interest rates and low merchant fees, they appear to be cutting costs by streamlining their organizations.

Card Company Branches Decreased by 40% Compared to Pre-COVID... Card Recruiters Halved

According to the Financial Supervisory Service on the 19th, the number of domestic branches of eight major full-service card companies in Korea (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Hana, BC, and Woori Card) was 121 last year, down 24 branches (16.5%) from the previous year. Compared to 2019, before COVID-19 (206 branches), the number has decreased by nearly half (41%) in four years.

Looking at the status of branches by card company, Hyundai Card had the largest decrease last year, cutting 15 domestic branches. Lotte Card reduced 6 branches, while Shinhan, Samsung, and KB Kookmin each closed one branch. Hana, Woori, and BC Cards maintained their existing branches.

As the number of branches decreased, the number of card recruiters working at these locations also dropped accordingly. The number of card recruiters at the eight domestic card companies fell from 11,382 in 2019 to 5,433 last year, a 52.2% decrease. Card recruiters are contract workers hired by card companies who receive a certain level of commission from the card company for each customer they attract. Under the Specialized Credit Finance Business Act, they are required to sign exclusive contracts with only one card company, so the reduction in branches dealt a direct blow to them.

Causes Include Performance Deterioration and Increased Funding Costs... Strengthening Online Marketing Due to Rise in Non-Face-to-Face Issuance

The reason card companies are continuously downsizing their offline sales organizations is interpreted as the impact of deteriorating performance. The net profit of the eight card companies last year was 2.5741 trillion KRW, down 5.6% from 2.7269 trillion KRW the previous year. Except for Hyundai Card, the net profits of the other seven card companies all decreased. Lotte Card saw a 32.3% increase, but this was due to a one-time effect from the sale of a subsidiary. Excluding this effect, net profit decreased by 39.2% compared to the previous year. Woori and BC Cards experienced the largest declines, with net profits falling 45.2% and 49.1%, respectively.

Increased funding costs are also a major reason for branch reductions. Unlike banks, card companies do not have deposit functions and raise funds needed for their business by issuing bonds. According to the Korea Financial Investment Association's Bond Information Center, as of the previous day, the interest rate on a 3-year maturity credit card bond with an AA+ credit rating was 3.775% per annum, slightly up from 3.730% on the 1st of the month. Approximately 6 trillion KRW worth of card company bonds mature by the end of June this year, about 60% of which were issued before 2021 at interest rates in the 1-2% range. Compared to current bond interest rates, these were about half as expensive. As maturities come due sequentially, card companies will have to raise funds at roughly twice the current interest rates.

With card issuance among the older generation reaching saturation, the younger generation, who have just become adults and are eligible for credit cards, are more accustomed to non-face-to-face issuance through applications, which is a major reason for the reduction of offline branches. Unlike in the past when cards were issued face-to-face at counters in large supermarkets or department stores, nowadays many sign up through comparison and recommendation sites or card company-exclusive apps. Branches operated as offices, satellite offices, or business offices incur significant operating costs such as rent and labor. A card company official explained, "We increased the number of branches when we strengthened auto financing sales in the past, but this trend has slowed due to the economic downturn. Since COVID-19, card issuance itself has become more non-face-to-face, and we are strengthening marketing through online channels."

Meanwhile, card companies are gradually increasing their overseas branches. The number of overseas branches of the eight card companies rose from 13 in 2019 to 22 last year, a 69.2% increase. This is understood to be an effort to strengthen overseas business as domestic revenue sources shrink due to reductions in card merchant fees.

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