As the credit card industry faces declining profitability due to reduced merchant fees, companies are expanding their financial services focused on credit loans, resulting in increased funding levels. Samsung Card, in particular, has shown aggressive growth, recording the largest increases in both credit loans and funding balance. In contrast, Shinhan Card, the industry leader, has adopted a strategy emphasizing asset efficiency, leading to a different trend.
According to the financial sector on May 19, the average funding balance for eight major credit card companies (Shinhan, Samsung, Hyundai, KB Kookmin, Lotte, Woori, Hana, and BC Card) reached 174.42 trillion won at the end of the first quarter, marking a 2.2% increase from 170.73 trillion won in the same period last year.
Unlike banks, credit card companies cannot accept deposits, so they rely on corporate bonds, asset-backed securities (ABS), and commercial paper (CP) for operational funding. The decline in profitability from their core payment business, due to ongoing reductions in merchant fees, has prompted these companies to accelerate their expansion into interest-based financial services such as credit loans, cash services, and installment financing.
According to the Korea Credit Finance Association, the credit loan balance for the eight card companies increased from 39.29 trillion won to 39.68 trillion won, a rise of 1.0% or 394.8 billion won during the same period.
Notably, Samsung Card's credit loan balance grew by 452.7 billion won over the past year, the largest increase in the industry. Its funding balance also rose by 2.28 trillion won, marking the most significant expansion. Industry analysts attribute this growth to Samsung Card's relatively stable delinquency rate, which allows for aggressive expansion in credit loans and installment financing.
As of the first quarter, Samsung Card maintained the lowest delinquency rate in the industry at 1.00%, down 0.12 percentage points from the previous year. This lower risk profile has enabled the company to pursue credit loan expansion more actively.
A Samsung Card representative stated, "We are providing stable funding to mid- to low-credit customers through mid-interest loans and plan to manage our credit loan balance based on risk management moving forward."
Conversely, Shinhan Card experienced a decrease in its funding balance by 1.18 trillion won, the largest decline among its peers. Its credit loan balance also fell by 161.9 billion won over the year. This shift is interpreted as a focus on maintaining asset quality and efficiency rather than aggressive growth.
In the first quarter, Shinhan Card's credit loan transactions totaled 2.22 trillion won, slightly down from 2.21 trillion won in the same period last year, while cash services dropped by 9.2% to 2.89 trillion won.
A Shinhan Card spokesperson commented, "In the face of increasing domestic and international uncertainties, we are focusing on optimizing our portfolio by reducing low-efficiency businesses and expanding high-efficiency ones. We are also committed to proactive risk management to continue improving our asset structure."
* This article has been translated by AI.
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