Card Approval Amount Negative for Two Consecutive Months... Concerns Over February Decline (Comprehensive)

January Card Approval Amount Decreases by 1.9%
Transportation Industry Plummets by 64.6%

[Asia Economy Reporter Ki Ha-young] As consumption shrinks due to the third wave of COVID-19 resurgence, credit card approval amounts recorded negative growth for two consecutive months. Concerns are also rising that card usage may have declined for three consecutive months due to the Lunar New Year holiday last month and the strengthened social distancing measures maintained amid a sharp increase in COVID-19 cases.

According to the 'January Card Approval Performance' announced by the Credit Finance Association on the 2nd, the total card approval amount in January was 72.7 trillion KRW, down 1.9% compared to the previous year. During this period, the number of approvals was 1.66 billion, a decrease of 6.9%. This marks the first time since the first COVID-19 wave in March-April last year that negative growth has been recorded for two consecutive months, following December last year.

In December last year, when the 2.5-level social distancing was implemented due to the third wave of COVID-19, the total card approval amount was 74.9 trillion KRW, down 3.8% from the same period last year. The number of approvals also shrank by 8.8% to 1.72 billion. After the card approval amount first declined in March last year when the first COVID-19 wave began, it turned to an upward trend from May but fell again in December.

However, the average approval amount was 43,762 KRW, an increase of 5.4% compared to the same period last year. Although the trend had been toward smaller card payments, it is interpreted that the number of transactions decreased due to the spread of COVID-19, but the amount paid per transaction increased.

Sharp Decline in Transportation and Leisure-Related Services... However, Consumer Sentiment Rebounds

By industry, the transportation sector's performance dropped sharply, falling by 64.6% compared to the previous year. This was due to reduced use of airlines, railways, and other transportation as travel and movement were discouraged under strengthened social distancing. Due to poor sales in travel-related services, card approval performance in business facility management and business support services also decreased by 52.3%. With fewer users at multi-use facilities such as theme parks, museums, and karaoke rooms, arts, sports, and other leisure-related services declined by 46.7%. The accommodation and food service sector and education services sector decreased by 33.1% and 12.5%, respectively.

Some express concerns that card approval performance may record negative growth for three consecutive months. Typically, card approval amounts decrease in months with Lunar New Year holidays due to shortened business days; last year, the holiday was in January, while this year it was in February. An industry official said, "Due to the third wave of COVID-19 and strengthened social distancing, card approval amounts have decreased for two consecutive months. Since social distancing continues in February and the Lunar New Year holiday is included, card approval amounts may also decline compared to the previous year."

However, according to the 'Recent Economic Trends in February' (Green Book) published by the Ministry of Economy and Finance, the consumer sentiment index in January was 95.4, up 4.2 points from December last year. This is explained by the easing of the increase in COVID-19 cases in January compared to December and the positive effect of favorable financial market conditions.