Capital Companies, Same Function Same Supervision
Card Companies, Different Product Categories Not Comparable
[Asia Economy Reporter Ki Ha-young] A turf war is unfolding between capital companies and card companies in the auto finance market. This is because card companies have entered the auto finance market, which has traditionally been the main domain of capital companies. As card companies' market share in new car financing has risen to 30%, the capital industry is voicing that the supervisory system should be the same for identical functions.
According to the industry on the 8th, at a meeting held the previous day between the Financial Supervisory Service (FSS) Governor and CEOs of specialized credit finance companies, Mok Jin-won, CEO of Hyundai Capital, raised the issue of fairness between capital companies and card companies when purchasing vehicles. He argued that there is discrimination in the operation of lease and installment sales agents under the Financial Consumer Protection Act.
Although both provide financial services linked to vehicle sales, if a car salesperson connects a loan through a capital company, it falls under the Financial Consumer Protection Act, but if connected through card payment, it does not. There is dissatisfaction that the strict Financial Consumer Protection Act, including responsibility for incomplete sales, applies only when using capital company installments. CEO Mok emphasized, "It is necessary for the supervisory authorities to provide sound guidance to ensure that the basic principle of 'same function, same supervision' can be applied by inspecting compliance with the Financial Consumer Protection Act in the sales field."
In response, the card industry explains that it is difficult to compare them on the same level. They argue that card products of card companies and installment finance products of capital companies are separate products. The card installment service provided by card companies when purchasing a vehicle is an additional service where interest rates and other terms are predetermined and customers use it knowingly. Since the original purpose of the Financial Consumer Protection Act was to suppress incomplete sales for consumer protection, card companies are already subject to the Act when issuing cards.
Card Companies Double New Car Finance Market Share in 5 Years... Competition with Capital Companies Intensifies
The industry interprets this as a turf war to secure market share in the auto installment finance market. Card companies, which urgently need business diversification due to losses in their core merchant fee business, are entering auto installment finance, intensifying competition in the auto finance market day by day. All six specialized card companies except Hyundai Card provide auto installment finance services, and their interest rates are also low. For example, when purchasing a Hyundai Avante new car (30% cash purchase ratio, 60-month loan period), Samsung Card offers the lowest interest rate of 2.3%.
The market share in new car financing has also changed drastically over the past five years. According to NICE Credit Rating, the market share of capital companies in new car financing fell nearly 15% from 84.9% in 2016 to 70.3% in the first half of this year. Meanwhile, credit card companies (Shinhan, KB Kookmin, Woori, Samsung Card) nearly doubled their share from 15.1% to 29.7% during the same period. As of the third quarter of this year, card companies have aggressively increased their auto installment finance assets to nearly 10 trillion won, while Hyundai Capital's auto installment finance assets decreased by 3.9% year-on-year to 13.8926 trillion won. In June, Hyundai Capital lowered auto installment interest rates by 0.7 percentage points after card companies began offering low-interest auto installment financing.
An industry insider said, "As card companies aggressively enter the auto installment finance market for business diversification, the turf war with the previously dominant capital companies is intensifying," adding, "As card companies have grown rapidly, the capital industry has begun to push back."
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