All 8 Major Credit Card Companies Express Intent to Participate
Scheduled for Release in the Second Half of This Year
[Asia Economy Reporter Ki Ha-young] The 'Haetsalron Card' for low-credit and low-income vulnerable groups has taken its first step toward launch. Although concerns about defaults were raised since the product targets low-credit individuals, all eight card companies have expressed their intention to participate, making the plan more concrete.
According to the card industry and the Korea Inclusive Finance Agency on the 18th, all eight specialized card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana, BC) plan to participate in the launch of the Haetsalron Card scheduled for the second half of the year. It is reported that the card companies recently submitted opinions regarding the design and operation of the Haetsalron Card, including merchant restrictions. A Korea Inclusive Finance Agency official said, "Currently, all eight card companies have verbally expressed their intention to participate," adding, "However, no concrete agreements such as business MOUs have been finalized yet."
The Haetsalron Card is a policy financial product planned by financial authorities to provide card usage benefits to low-credit individuals with a credit score of 680 or below (based on NICE, equivalent to past credit grade 7 or lower) who do not meet the credit card issuance criteria. It is part of the 'Policy Inclusive Finance Supply System Reform Plan' announced by financial authorities as a follow-up measure to the maximum interest rate reduction to be implemented from July this year.
Haetsalron Card Scheduled for Launch in Q4 This Year
Under the premise that income verification is possible, individuals in the bottom 10% of credit scores who complete more than three hours of credit management education can apply for the Haetsalron Card, with a usage limit of up to 2 million KRW per month.
However, usage is restricted for cash advances, card loans, and seven major industries (general entertainment bars, dance entertainment bars, other bars, hygiene industries, leisure industries, gambling industries, and other industries). Haetsalron Card users will be offered benefits such as billing discounts based on usage amounts and interest-free installments.
The financial authorities plan to develop a repayment willingness index considering repayment history, financial education, and credit management consulting to differentiate the guarantee limits for Haetsalron Card payments. Card companies will set individual credit payment limits according to the guarantee limits set by the Financial Services Commission. The guarantee fund will be prepared from the Korea Inclusive Finance Fund, which is funded by government finances along with contributions from banks, insurance companies, card companies, savings banks, and mutual finance industries.
As a new financial product for low-credit and low-income vulnerable groups, concerns about defaults were also raised within the card industry. While the intention to expand credit card issuance options for financially vulnerable individuals is understood, there were concerns that issuing credit cards to low-credit individuals might increase the risk of defaults rather than acquiring new customers. In response, Eun Sung-soo, Chairman of the Financial Services Commission, dispelled industry concerns at a meeting with representatives of card, capital, and savings banks early last month by stating, "Since it will operate with a 100% guarantee ratio, the burden on the card industry in case of defaults will be very low."
An industry official said, "Unless something unexpected happens, all card companies are in an atmosphere of participating in the Haetsalron Card launch," adding, "They are approaching it from the perspective of ESG (Environmental, Social, and Governance) management, which is becoming increasingly important recently."
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