Credit Card Companies Launch Full-Scale Territory Battle Over New Business Opportunity: 'Auto Installment Financing'

Q1 Net Income of 5 Companies Increased by 3.7%
Installment Finance Assets Also Showing an Upward Trend

[Asia Economy Reporter Ki Ha-young] Card companies are gearing up for fierce territorial competition in the auto installment financing market in the second half of this year. As profits have declined due to reductions in merchant fees, many are planning to expand their auto installment financing business, which has emerged as a new growth area.

According to the Financial Supervisory Service's Financial Statistics Information System on the 7th, the net income from auto installment financing of five card companies (Shinhan, Samsung, KB Kookmin, Woori, Lotte) operating in the first quarter of this year reached 64.9 billion KRW, a 3.7% increase compared to the previous year. Shinhan Card recorded 31 billion KRW, up 12.6% year-on-year, and KB Kookmin Card increased by 45.3% to 22.1 billion KRW.

Auto installment financing assets are also steadily increasing. During the same period, auto installment financing assets totaled 7.6997 trillion KRW, up 4.6% from the previous year. In particular, Lotte Card saw the largest asset increase, recording 51.4 billion KRW, a 55.8% rise compared to the previous year. KB Kookmin Card also surged 43.5% year-on-year to 2.9202 trillion KRW during this period. Shinhan Card, which holds the largest auto installment financing asset size, achieved 3.1771 trillion KRW, a 15% increase from the previous year.

Card companies plan to expand their auto installment financing business in the second half of the year to compensate for deteriorating profitability caused by reductions in merchant fees. In fact, merchant fee income for seven specialized card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana) in the first quarter was 990.4 billion KRW, down 13.1% year-on-year.

The implementation of the revised Credit Finance Business Supervision Regulations, which will ease the leverage limit from 6 times to 8 times starting in October, is also expected to have an impact. With an increased leverage limit, card companies can expand their assets, enabling them to grow their auto installment financing assets and strengthen operations.

Shinhan Card and KB Kookmin Card are targeting the used car installment financing market. In March, Shinhan Card acquired long-term rental car assets worth 500 billion KRW from Hyundai Capital. In April, it signed an agreement to provide installment financing with 'Auto Meca Incheon An,' the largest used car trading complex in the Chungnam region. This marked the first successful partnership by a card company in the used car trading complex finance market, which has been dominated by large capital companies.

KB Kookmin Card is pursuing various projects related to used car installment financing. In January, KB Kookmin Card opened the 'Auto Finance Center,' a specialized used car installment financing branch in Gangseo-gu, Seoul, and is considering establishing additional Auto Finance Centers in other regions in the second half of the year. In the fourth quarter, it will also launch the 'Peer-to-Peer Used Car Transaction Card Safe Payment Service,' selected as an innovative financial service by the Financial Services Commission.