Credit Card Companies' Profitability Declines
76 Models Discontinued in First Half... Nearly Half of Last Year's Total
[Asia Economy Reporter Ki Ha-young]#. Housewife Kim Ji-eun (35) recently sighed upon hearing the news that the 'Emart KB Kookmin Card' she had been using well was being discontinued. This card was a so-called 'Gulbi Card' that shared performance and annual fees with other KB Kookmin Cards, offering substantial benefits. Kim had been meeting the previous month's spending requirements with other cards while enjoying discounts at Emart and on academy fees with the Emart KB Kookmin Card. She lamented, "Several cards with great benefits that I had since last year have been discontinued one after another," adding, "It's true that among the newly released cards recently, it's hard to find services as attractive as before."
Facing profitability deterioration due to merchant fee reductions, card companies are stopping the issuance of existing cards citing cost-cutting measures. As relatively beneficial premium cards are discontinued one after another, concerns are rising that consumer benefits are shrinking.
According to the card industry on the 20th, the 'Emart KB Kookmin Card,' popular as a Gulbi Card sharing performance and annual fees with other cards, will cease new issuance on the 31st of this month. Lotte Card's 'Like It Fun' will also be discontinued starting next month on the 1st. Like It Fun was highly favored for its low annual fee and solid discounts on coffee and public transportation, ranking first in popularity for the first half of this year as well as last year on Card Gorilla, the largest credit card specialist site in Korea.
Last month, partnership cards offering discounts or cashback through agreements with specific merchants disappeared one after another. Shinhan Card stopped issuing 28 types of cards, including three '2030' series and nine 'Big Plus' series, while Woori Card decided to discontinue 13 types, including three Jeongseok Direct cards (Direct, Discount, SSO3 Check), two Free Travel cards, Only (ONLY) My Card, and Woori V Railroad Mileage Card.
76 Credit Cards Discontinued in the First Half of This Year
The number of credit cards discontinued in the first half of this year is nearly half of those discontinued last year. Many of these were considered premium cards offering high consumer benefits. Representative examples include the 'KB Kookmin Tantan Dero Biz Titanium Card,' which provided solid rewards when refueling and shopping at the three major discount stores and six major online shopping malls, and Lotte Card's 'I'm YOLO,' which offered a 1.2% payment day discount on all overseas spending regardless of the previous month's performance.
The number of discontinued cards has been increasing annually since 2017. The seven full-service card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana) discontinued 73 cards in 2017, 82 in 2018, and nearly doubled to 160 last year. As of July 6 this year, a total of 76 cards have been discontinued. Given this trend, there is speculation that more cards may be discontinued than last year. Especially since this year, the 'Profitability Analysis System Guideline' was introduced, requiring card companies to release only products that can generate profits over the next five years based on profitability analysis, making it difficult to launch cards with high-cost benefits.
The root cause of these credit card discontinuations lies in the worsening profitability of card companies. In fact, the main source of income for card companies, merchant fee revenue, is steadily decreasing. According to the Financial Supervisory Service's Financial Statistics Information System, merchant fee revenue for the seven full-service card companies in the first quarter of this year was 990.5 billion won, down 13.1% from 1.1402 trillion won in the same period last year.
An industry insider said, "With merchant fee reductions leading to cost-cutting, card companies have no choice but to discontinue unprofitable products going forward," adding, "Ultimately, this inevitably leads to a reduction in consumer benefits."
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