[Pay War Act 2] ① Rise of Hyundai Card and Samsung Pay Monetization... Beginning of a Paradigm Shift

Thanks to Apple Pay... Hyundai Card's New Members Surge
Unsettled Big Tech... Accelerating Alliances
Card Companies Also Nervous... "Must Secure Profitability"

[Image source=Yonhap News]

With the arrival of Apple Pay, changes are beginning in the credit card and simple payment markets. While Hyundai Card is seeing significant effects in attracting new members, alliances and rivalries among Samsung Pay, Naver, and Kakao are also progressing rapidly. Even Samsung Pay, which was virtually free, is now moving toward a paid model, complicating the calculations of card companies and big tech firms.

Hyundai Card New Members↑... Strong Apple Pay Effect

According to the Credit Finance Association on the 22nd, Hyundai Card's new member count last month was 166,000. Compared to Shinhan Card, Samsung Card, and KB Kookmin Card, which each had around 110,000 new members, about 50,000 more people flocked to Hyundai Card. This is interpreted as the effect of exclusively introducing Apple Pay. In March, when Apple Pay was launched, the number of new members was 203,000, ranking first overwhelmingly. The number of new members acquired in March and April totaled 369,000, far surpassing KB Kookmin Card's 267,000, Shinhan Card's 255,000, and Samsung Card's 243,000 during the same period. Considering that Apple Pay was launched on March 21, a surge in issuance applications occurred from the last week. Hyundai Card also led in the domestic individual usage amount growth rate last month compared to the previous month (excluding cash services and card loans) at 34.9%, surpassing other major card companies such as Shinhan (34.6%), Samsung (30.8%), and KB Kookmin (33.8%).

As the Apple Pay effect grew, Samsung Pay also took action. Samsung Electronics recently informed card companies that it would not renew existing fee contracts. Until now, card companies had signed group contracts to use Samsung Pay for free and extended them annually. They only paid royalties for Samsung Pay's Magnetic Secure Transmission (MST) payment technology. Industry insiders view the end of Samsung Pay's contract renewal as a step toward Samsung Pay's 'monetization.' It is expected that Samsung Pay will demand a fee per transaction, similar to Apple Pay. Currently, Apple Pay is known to charge a 0.15% fee per transaction.

Fear of Inconvenience Spreading... Big Techs in a Hurry

Domestic big tech companies like Naver and Kakao are also in a hurry. They had been pushing for offline expansion based on stable online payment market shares, but the emergence of Apple Pay has put a brake on this. The current scale of Apple Pay itself is not a big burden. Since they already have strong dominance in the online simple payment market, immediate profitability concerns are minimal.

The problem is that with Apple Pay's arrival, contactless simple payments have become possible on almost all smartphones, including Apple and Android devices. Apple Pay and Samsung Pay are NFC-based payment methods that can be easily operated without installing separate applications. As these become widespread, the usage processes of domestic simple payment services based on QR codes, such as Naver Pay and Kakao Pay?which include unlocking the smartphone, launching the app, selecting the payment function, and scanning the QR code?have started to be perceived as 'inconvenient.' Seo Ji-yong, president of the Korea Credit Card Association and professor of business administration at Sangmyung University, explained, "This change in perception may have a greater impact on the simple payment market than figures like transaction amounts."

Recently, Naver Pay's collaboration with Samsung Electronics to enable payments via the Samsung Pay method is seen as a way to alleviate such concerns. In addition, aggressive promotional events are underway, such as double issuance of Naver Pay Points that can be used like cash for a single payment. Kakao Pay is also reportedly preparing to collaborate with Samsung Pay.

Card Companies Struggling Over Fee Issues

Card companies, which have been focusing on managing soundness and profitability in preparation for an uncertain economy, are also facing difficulties. They are currently partnering with Apple Pay despite the fee burden to avoid losing ground to Hyundai Card. If Samsung Pay also demands a fee per transaction, expenses will increase significantly. Furthermore, if other simple payment providers also raise fees, profits could shrink even more.

Card companies' poor performance has already appeared since the first quarter of this year. The net profits of top card companies such as Shinhan Card (-5.2%), Samsung Card (-9.5%), and Hyundai Card (-7.9%) all decreased compared to the same period last year. KB Kookmin Card, ranked third or fourth, dropped 31% compared to the first quarter of last year. The declines were even steeper for Hana Card (-63%), Lotte Card (-40.5%), and Woori Card (-46.3%). This was due to a sharp rise in market interest rates last year, which increased funding costs, and a rise in delinquency rates, leading to a surge in bad debt provisions. An industry insider from the simple payment sector said, "The ripple effect of Apple Pay is significantly impacting not only card companies and simple payment providers but also smartphone manufacturers like Samsung Electronics," adding, "The survival competition will become even fiercer going forward."