Easy Payment Services Threatening Card Companies? "Joint Platform Development Needed"

Goddess Finance Research Institute
'Report on the Emergence of Simple Payment Services and Their Impact on the Card Industry'

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[Asia Economy Reporter Ki Ha-young] An analysis has emerged that credit card companies need to build a joint simple payment platform to compete with simple payment service providers.

According to the credit finance industry on the 26th, the Credit Finance Research Institute under the Credit Finance Association recently stated this in its report titled "The Emergence of Simple Payment Services and the Impact Analysis on the Card Industry."

The domestic and international payment markets are changing with the emergence of various pay services provided by non-financial simple payment service providers. Simple payment is a method where payment information is pre-registered on electronic devices such as mobile devices, and payments are made with simple authentication. It is a service that improves access channels and convenience in the delivery process, rather than replacing existing electronic payment methods such as account transfers and payment cards.

The institute diagnosed that simple payment providers are leading the payment ecosystem by dominating customer contact points, which are channels to customers. In particular, in terms of online market share, they have already overwhelmed credit card companies, weakening the card companies' dominance over customer contact points. The institute analyzed, "For card companies, partnerships with non-financial simple payment providers are not a major concern in the short term as credit card usage is increasing," but added, "In the long term, it could be a factor that expands the influence of simple payment providers and weakens the card companies' leadership."

Therefore, it pointed out that the card industry should provide a joint simple payment platform to overcome the lack of universality and continuously strive to lead the offline payment market. It also suggested utilizing mobile or biometric authentication so that card users can conveniently use specific cards from multiple card companies.

Additionally, the institute analyzed that efforts to break away from traditional card business should be made in preparation for the introduction of new electronic financial businesses such as Payment Initiation Service Providers (PISP) and comprehensive payment services.

The institute predicted that the emergence of PISP, a direct debit payment method, could reduce the use of card companies' debit and credit cards. It is expected that debit cards will be directly affected because they offer relatively fewer benefits compared to credit cards and have functions similar to direct debit cards.

The institute emphasized, "Beyond card operations, it is necessary to evolve into a more specialized payment company by performing PISP and, further, comprehensive payment services," adding, "Participation in PISP enables the development of new revenue models by providing diverse and simple account-based payment and remittance services in addition to existing credit card payment services."

Major overseas card companies are already making efforts to evolve into specialized payment companies by participating in PISP or acquiring account-based payment service providers. American Express obtained PISP authorization through its subsidiary, while Visa and MasterCard strengthened their payment and remittance service sectors by acquiring account-based payment infrastructure companies.

The institute advised, "The card industry needs a series of efforts to prevent the loss of card customers, who are the decision-makers in choosing payment methods, and to attract new customers," and added, "Card companies should leverage their big data capabilities to develop products that enhance credit provision functions and provide differentiated customer benefits compared to account-based payment services to promote credit card usage."