[Reporter’s Notebook] Card Companies Cut Customer Benefits While Earning the Highest Salaries in Finance

Card industry workers I met during this year's coverage all complained that the business conditions are extremely difficult. They cited reasons such as not making profits from their core business due to merchant commission rates in the 0% range and soaring funding costs caused by prolonged high interest rates.

Any sympathy for the card industry quickly vanished after reviewing the business reports released recently by card companies for last year. Despite declining performance due to worsening business conditions, they took home the highest compensation in the financial sector.

Last year, card companies had the highest average annual salary in the financial sector. The average annual salary of Samsung Card employees was 146 million KRW, exceeding that of Samsung Fire & Marine Insurance, the top insurance company, which was 143.94 million KRW. The average annual salary of the top 4 card companies was 125.25 million KRW, higher than the top 4 banks’ average of 116 million KRW.

The critical view toward their high salaries and bonuses is not simply because the amounts are large. It lies in the fact that card companies, while citing deteriorating performance as a reason, raised annual fees and hastily discontinued cards that offered good benefits, yet strictly maintained their own compensation. Last year, the eight specialized card companies discontinued 458 card types, a fourfold increase compared to the previous year. Meanwhile, their annual fee revenue increased by 8.6% to 1.3312 trillion KRW. Due to reduced interest-free installment benefits, installment fee revenue also surged by 31.5% to 3.1734 trillion KRW.

Compared to other financial companies, card companies have been passive in the government-promoted 'win-win finance' initiatives. From August last year to the end of February this year, the participation amount of nine credit-specialized companies including card companies in win-win finance was 118.9 billion KRW, achieving only 55.1% of the target. The banking sector achieved 907.6 billion KRW, realizing 95.3% of its goal. The insurance sector also contributed about 520 billion KRW this year by lowering automobile insurance premiums by an average of 2.5%.

Card companies recently faced public backlash after it was revealed that they collected 90 billion KRW in fees last year from 'Debt Cancellation and Deferral Products' (DCDS). DCDS is a type of insurance product that exempts or defers card debt when customers who paid fees become unable to pay due to death or illness. Sales were halted in 2016 amid incomplete sales controversies. However, since then, they did not notify existing customers about the possibility of cancellation and collected 900 billion KRW in fees over the past seven years.

This year is the year to set merchant commission rates, which occur every three years. The card industry is determined to achieve the long-awaited commission rate increase through full public discussion after the general election. However, it is questionable how persuasive they will be in front of stakeholders such as small business owners, financial authorities, and politicians, given the self-inflicted title of 'highest salary in the financial sector.'